<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED OCTOBER 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-18339
SYLVAN INC.
(Exact name of registrant as specified in its charter)
NEVADA 25-1603408
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
333 MAIN STREET, P.O. BOX 249, SAXONBURG, PA 16056-0249
(Address of principal executive offices) (Zip Code)
(724) 352-7520
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Number of shares of common stock outstanding as of October 29, 1999...5,813,636
<PAGE> 2
SYLVAN INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
Part I - FINANCIAL INFORMATION
<S> <C>
Item 1. Condensed Consolidated Balance Sheets
October 3, 1999 and January 3, 1999 ............................................................3
Condensed Consolidated Statements of Income, Three Months
Ended October 3, 1999 and September 27, 1998 ...................................................5
Condensed Consolidated Statements of Income, Nine Months
Ended October 3, 1999 and September 27, 1998 ...................................................6
Condensed Consolidated Statements of Cash Flows, Nine Months
Ended October 3, 1999 and September 27, 1998 ...................................................7
Notes to Condensed Consolidated Financial Statements
October 3, 1999.................................................................................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................................................13
Item 3. Quantitative and Qualitative Disclosures About Market Risk ...................................19
Part II - OTHER INFORMATION
Item 1. Legal Proceedings ............................................................................20
Item 6. Exhibits and Reports on Form 8-K .............................................................20
</TABLE>
<PAGE> 3
Part 1 - Financial Information
Item 1.
CONDENSED CONSOLIDATED BALANCE SHEETS
Sylvan Inc. and Subsidiaries
(In Thousands)
<TABLE>
<CAPTION>
October 3, 1999 January 3, 1999
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,889 $ 6,497
Trade accounts receivable, net of allowance
for doubtful accounts of $832 and $710, respectively 11,622 12,630
Inventories 9,795 9,820
Prepaid income taxes and other expenses 1,877 1,459
Other current assets 3,854 1,505
Deferred income tax benefit 686 856
- ----------------------------------------------------------------------------------------------
Total current assets 35,723 32,767
Property, plant and equipment, net 52,812 53,439
Intangible assets, net of accumulated amortization
of $3,742 and $3,249, respectively 11,238 12,218
Other assets, net of accumulated amortization
of $326 and $272, respectively 1,358 4,126
- ----------------------------------------------------------------------------------------------
TOTAL ASSETS $101,131 $102,550
==============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEETS
Sylvan Inc. and Subsidiaries
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
October 3, 1999 January 3, 1999
--------------- ---------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,977 $ 825
Accounts payable - trade 4,642 5,341
Accrued salaries, wages and other employee benefits 3,097 2,504
Other accrued liabilities 1,447 2,150
Income taxes payable 3,782 3,041
- --------------------------------------------------------------------------------------------------------------------
Total current liabilities 15,945 13,861
- --------------------------------------------------------------------------------------------------------------------
Long-term and revolving-term debt 36,231 34,586
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities:
Other employee benefits 982 1,054
Other 1,147 1,437
- --------------------------------------------------------------------------------------------------------------------
Total other long-term liabilities 2,129 2,491
- --------------------------------------------------------------------------------------------------------------------
Minority interest 1,446 1,348
SHAREHOLDERS' EQUITY:
Common stock, voting, par value $.001, 10,000,000 shares authorized,
6,671,601 and 6,637,201 shares issued and 5,813,636 and 6,387,336 shares
outstanding at October 3, 1999 and January 3, 1999, respectively 7 7
Common capital contributed in excess of par 16,736 16,443
Retained earnings 45,750 41,657
Less: Treasury stock, at cost, 857,965 and 249,865 shares
at October 3, 1999 and January 3, 1999, respectively (9,169) (2,318)
-------- --------
53,324 55,789
Cumulative translation adjustment (4,541) (2,122)
Pension adjustment (3,403) (3,403)
- --------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive deficit (7,944) (5,525)
- --------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 45,380 50,264
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $101,131 $102,550
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sylvan Inc. and Subsidiaries
(Unaudited, In Thousands Except Share Data)
<TABLE>
<CAPTION>
-------- Three Months Ended ---------
October 3, 1999 September 27, 1998
--------------- ------------------
<S> <C> <C>
NET SALES $22,222 $22,316
- -----------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES:
Cost of sales 13,048 13,380
Selling, administration, research and development 5,009 4,999
Depreciation 1,372 1,358
- -----------------------------------------------------------------------------------------------
19,429 19,737
- -----------------------------------------------------------------------------------------------
OPERATING INCOME 2,793 2,579
INTEREST EXPENSE, NET, INCLUDING
AMORTIZATION OF DEBT ISSUANCE COST 595 557
OTHER INCOME (EXPENSE) (17) (23)
- -----------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 2,181 1,999
PROVISION FOR INCOME TAXES 582 580
- -----------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTEREST IN
INCOME OF CONSOLIDATED SUBSIDIARIES 1,599 1,419
MINORITY INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARIES 97 112
- -----------------------------------------------------------------------------------------------
NET INCOME $ 1,502 $ 1,307
===============================================================================================
NET INCOME PER SHARE - BASIC $ 0.25 $ 0.20
===============================================================================================
NET INCOME PER SHARE - DILUTED $ 0.25 $ 0.20
===============================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 6,021,483 6,448,245
===============================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES 6,048,062 6,528,630
===============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sylvan Inc. and Subsidiaries
(Unaudited, In Thousands Except Share Data)
<TABLE>
<CAPTION>
-------- Nine Months Ended ---------
October 3, 1999 September 27, 1998
--------------- ------------------
<S> <C> <C>
NET SALES $65,642 $65,275
- ----------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES:
Cost of sales 38,561 38,045
Selling, administration, research and development 15,653 14,753
Depreciation 4,088 3,849
- ----------------------------------------------------------------------------------------------
58,302 56,647
- ----------------------------------------------------------------------------------------------
OPERATING INCOME 7,340 8,628
INTEREST EXPENSE, NET, INCLUDING
AMORTIZATION OF DEBT ISSUANCE COST 1,655 1,619
OTHER INCOME (EXPENSE) 49 (62)
- ----------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 5,734 6,947
PROVISION FOR INCOME TAXES 1,543 2,015
- ----------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTEREST IN
INCOME OF CONSOLIDATED SUBSIDIARIES 4,191 4,932
MINORITY INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARIES 98 212
- ----------------------------------------------------------------------------------------------
NET INCOME $ 4,093 $ 4,720
==============================================================================================
NET INCOME PER SHARE - BASIC $ 0.66 $ 0.73
==============================================================================================
NET INCOME PER SHARE - DILUTED $ 0.66 $ 0.72
==============================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 6,217,052 6,453,335
==============================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES 6,248,502 6,545,331
==============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Sylvan Inc. and Subsidiaries
(Unaudited, In Thousands)
<TABLE>
<CAPTION>
----------Nine Months Ended-----------
October 3, 1999 September 27, 1998
--------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,093 $ 4,720
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 4,635 4,469
Employee benefits 670 (444)
Trade accounts receivable 486 1,648
Inventories (293) (1,664)
Prepaid expenses and other assets 52 (992)
Accounts payable and accrued liabilities (1,201) (2,057)
Other 1,255 824
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 9,697 6,504
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisition, net of cash acquired 0 (1,619)
Net expenditures for property, plant and equipment (5,740) (5,004)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (5,740) (6,623)
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (542) (444)
Net borrowings under revolving credit line 4,698 241
Proceeds from exercise of stock options 293 427
Purchase of treasury shares (6,851) (850)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (2,402) (626)
- -----------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATES ON CASH (163) 391
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,392 (354)
CASH AND CASH EQUIVALENTS, beginning of period 6,497 5,567
- -----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 7,889 $ 5,213
=============================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:
Interest paid $ 1,690 $ 1,673
Income taxes paid 628 1,758
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCIAL ACTIVITIES:
In May 1998, the company purchased 90% of the capital stock of International
Mushrooms Ltd. (an Irish corporation) for $1.6 million. In conjunction with this
acquisition, liabilities were assumed as follows:
Fair value of assets acquired $ 4,492
Cash paid for the capital stock (1,619)
-------
Liabilities assumed $ 2,873
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Sylvan Inc. and Subsidiaries
October 3, 1999
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
General
-------
These condensed consolidated financial statements of Sylvan Inc. are
unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim period. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto contained in the company's Annual Report to
Shareholders and its Form 10-K for the year ended January 3, 1999.
Cash
----
The company maintains a French-franc denominated cash balance of
approximately FF15.0 million with a U.S. bank in support of a loan
advanced by a European bank. This balance is reported under "Other Current
Assets" as of October 3, 1999.
Inventories
-----------
Inventories at October 3, 1999 and January 3, 1999 consisted of the
following:
<TABLE>
<CAPTION>
(in thousands) October 3, 1999 January 3, 1999
--------------- ---------------
<S> <C> <C>
Growing crops and compost material $4,756 $4,882
Stores and other supplies 1,675 1,632
Mushrooms and spawn on hand 3,364 3,306
------ ------
$9,795 $9,820
====== ======
</TABLE>
Labor Agreement
---------------
On July 20, 1999, the company's Quincy subsidiary signed a collective
bargaining agreement with the United Farm Workers of America. The contract
covers various harvesting and packaging employees at the Quincy operation.
Acquisition Agreement
---------------------
During the quarter ended October 3, 1999, the company entered into a
letter of intent to acquire substantially all of the assets of the J.B.
Swayne Spawn Company of Kennett Square, Pennsylvania, a modern producer
that distributes its product throughout North America.
Earnings Per Common Share
-------------------------
Earnings per share were calculated using the weighted average number of
shares outstanding during the period and including the effect of stock
options outstanding. Pursuant to the company's 1990 and 1993 stock option
plans, options for a total of 1,368,417 shares of the company's common
stock have been granted and options for a total of 526,808 of these shares
have been exercised as of October 3, 1999.
8
<PAGE> 9
The following tables reconcile the number of shares utilized in the
earnings per share calculations for the three and nine months ended
October 3, 1999 and September 27, 1998.
<TABLE>
<CAPTION>
Three Months Ended
October 3, 1999 September 27, 1998
--------------- ------------------
<S> <C> <C>
Net income (in thousands) $ 1,502 $ 1,307
========== ==========
Earnings per common share - basic $ .25 $ .20
========== ==========
Earnings per common share - diluted $ .25 $ .20
========== ==========
Common shares - basic 6,021,483 6,448,245
Effect of dilutive securities: stock options 26,579 80,385
---------- ----------
Common shares - diluted 6,048,062 6,528,630
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
October 3, 1999 September 27, 1998
--------------- ------------------
<S> <C> <C>
Net income (in thousands) $ 4,093 $ 4,720
========== ==========
Earnings per common share - basic $ .66 $ .73
========== ==========
Earnings per common share - diluted $ .66 $ .72
========== ==========
Common shares - basic 6,217,052 6,453,335
Effect of dilutive securities: stock options 31,450 91,996
---------- ----------
Common shares - diluted 6,248,502 6,545,331
========== ==========
</TABLE>
Options to purchase approximately 424,000 and 386,000 shares of common
stock in the three months and nine months ended October 3, 1999,
respectively, and options to purchase 88,000 shares of common stock in
both the three and nine months ended September 27, 1998 were outstanding,
but were not included in the computation of diluted earnings per share
because the options' exercise prices were greater than the average market
price of the company's common shares for the periods.
Reclassifications
-----------------
Certain reclassifications have been made to the prior-year condensed
consolidated financial statements to conform to the current-year
presentation.
2. LONG-TERM DEBT AND BORROWING ARRANGEMENTS:
The company has a Revolving Credit Agreement with two commercial banks,
dated August 6, 1998. It provides for revolving credit loans on which the
aggregate outstanding balance available to the company may not initially
exceed $55.0 million. This aggregate outstanding balance will decline over
the life of the agreement as follows:
Maximum Aggregate
Period Beginning Outstanding Balance
---------------- -------------------
August 6, 2003 $50.0 million
August 6, 2004 45.0 million
9
<PAGE> 10
Outstanding borrowings under the agreement bear interest at either the
Prime Rate or LIBOR (plus an applicable margin) at the company's option.
On October 3, 1999, the company had outstanding borrowings under the
agreement of $34.3 million. The revolving credit loans mature on August 5,
2005.
The agreement provides for the maintenance of various financial covenants
and includes limitations as to incurring additional indebtedness and the
granting of security interests to third parties. Obligations under the
agreement are guaranteed by certain wholly owned subsidiaries of the
company.
The company has a French-franc denominated loan of FF15.0 million.
Interest is payable based on a formula that utilizes a Paris Interbank
Offered Rate plus an applicable margin. Repayment is due in January 2000.
This loan is supported by a compensating cash balance maintained in a U.S.
bank.
The company's majority-owned Dutch subsidiary has a long-term plant and
equipment and overdraft facility with a Dutch bank. At October 3, 1999,
term loans amounting to 2.8 million Dutch guilders were outstanding under
this agreement.
3. COMPREHENSIVE INCOME:
Comprehensive income consists of the following:
<TABLE>
<CAPTION>
Three Months Ended
(in thousands) October 3, 1999 September 27, 1998
--------------- ------------------
<S> <C> <C>
Net income $ 1,502 $ 1,307
Other comprehensive income:
Foreign currency translation adjustment 1,254 1,921
-------- -------
Comprehensive income $ 2,756 $ 3,228
======== =======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
(in thousands) October 3, 1999 September 27, 1998
--------------- ------------------
<S> <C> <C>
Net income $ 4,093 $ 4,720
Other comprehensive income (loss):
Foreign currency translation adjustment (2,419) 1,361
-------- -------
Comprehensive income $ 1,674 $ 6,081
======== =======
</TABLE>
4. BUSINESS SEGMENT INFORMATION:
Sylvan is a worldwide producer and distributor of mushroom products,
specializing in spawn (the equivalent of seed for mushrooms) and
spawn-related products and services, and is a major grower and marketer of
fresh mushrooms in the United States. The company has two reportable
business segments: spawn products, which includes spawn-related products
and services, and fresh mushrooms. Spawn-related products include casing
inoculum, nutritional supplements and disease-control agents. During the
quarter and nine months ended October 3, 1999, the company made no changes
in the basis of segmentation or in the basis of measurement of segment
profit or loss from that reported in the January 3, 1999 financial
statements.
10
<PAGE> 11
<TABLE>
<CAPTION>
Three Spawn Fresh
Months Products Mushrooms
(in thousands) Ended Segment Segment Total
----- ------- ------- -----
<S> <C> <C> <C> <C>
Total revenues 1999 $15,611 $6,922 $22,533
1998 15,102 7,500 22,602
Intersegment revenues 1999 311 -- 311
1998 286 -- 286
Segment operating income 1999 3,585 57 3,642
1998 3,470 (84) 3,386
</TABLE>
Reconciliation to Consolidated Financial Data
---------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
(in thousands) October 3, 1999 September 27, 1998
--------------- ------------------
<S> <C> <C>
Total revenues for reportable segments $22,533 $22,602
Elimination of intersegment revenues (311) (286)
------- -------
Total consolidated revenues $22,222 $22,316
======= =======
Segment operating income $ 3,642 $ 3,386
Unallocated corporate expenses (849) (807)
Interest expense, net (595) (557)
Other income (expense) (17) (23)
------- -------
Consolidated income before income taxes $ 2,181 $ 1,999
======= =======
</TABLE>
<TABLE>
<CAPTION>
Nine Spawn Fresh
Months Products Mushrooms
(in thousands) Ended Segment Segment Total
----- ------- ------- -----
<S> <C> <C> <C> <C>
Total revenues 1999 $44,956 $21,610 $66,566
1998 42,810 23,301 66,111
Intersegment revenues 1999 924 -- 924
1998 836 -- 836
Segment operating income 1999 9,171 907 10,078
1998 9,658 1,411 11,069
</TABLE>
11
<PAGE> 12
Reconciliation to Consolidated Financial Data
---------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
(in thousands) October 3, 1999 September 27, 1998
--------------- ------------------
<S> <C> <C>
Total revenues for reportable segments $66,566 $66,111
Elimination of intersegment revenues (924) (836)
------- -------
Total consolidated revenues $65,642 $65,275
======= =======
Segment operating income $10,078 $11,069
Unallocated corporate expenses (2,738) (2,441)
Interest expense, net (1,655) (1,619)
Other income (expense) 49 (62)
------- -------
Consolidated income before income taxes $ 5,734 $ 6,947
======= =======
</TABLE>
12
<PAGE> 13
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sylvan Inc. and Subsidiaries
RESULTS OF OPERATIONS (Three Months Ended October 3, 1999 and September 27,
1998)
CONSOLIDATED REVIEW
Net Sales
- ---------
(dollars in thousands) 1999 1998 % Change
---- ---- --------
Net sales $22,222 $22,316 --
Net sales for the three months ended October 3, 1999 were $22.2 million,
essentially the same as the $22.3 million reported for the corresponding 1998
quarter. International sales for the quarter increased to 51%, as compared with
50% for the third quarter of 1998. Further strengthening of the U.S. dollar
continued to offset the effect of increased international sales volumes. The
U.S. dollar was approximately 6% stronger at the end of the current quarter, in
terms of the company's applicable foreign currencies, than at the end of the
third quarter of 1998. This strengthening of the U.S. dollar had the effect of
decreasing sales for the current quarter by approximately $.8 million.
Operating Costs and Expenses
- ----------------------------
(dollars in thousands) 1999 1998 % Change
---- ---- --------
Cost of sales $13,048 $13,380 (2)
Selling, administration, 5,009 4,999 --
research and development
Depreciation 1,372 1,358 1
The company's cost of sales, expressed as a percentage of sales, was 58.7% for
the third quarter of 1999, versus 60.0% for the third quarter of 1998. Increased
production efficiencies were realized in both business segments during the third
quarter of 1999, as compared with the corresponding quarter of 1998. Selling,
administration, research and development expenses were essentially unchanged at
$5.0 million for the quarters ended October 3, 1999 and September 27, 1998.
These expenses were 22.5% of sales and 22.4% of sales, respectively.
Depreciation expense for the third quarter of 1999 was $1.4 million, $14,000
higher than for the third quarter of 1998.
Interest Expense
- ----------------
The company's net interest expense for the third quarter of 1999 was $595,000,
7% higher than for the corresponding 1998 quarter. The effective borrowing rate
for the current quarter was 6.5%, as compared with 6.8% for the third quarter of
1998. Higher levels of indebtedness between periods were slightly offset by the
lower effective interest rate.
Income Tax Expense
- ------------------
The effective income tax rate was 27% for the third quarter of 1999, as compared
with 29% for the corresponding quarter of 1998.
13
<PAGE> 14
BUSINESS SEGMENTS
Spawn Products Segment
- ----------------------
(dollars in thousands) 1999 1998 % Change
---- ---- --------
Sales, including intersegment $15,611 $15,102 3
Operating expenses 12,026 11,632 3
Operating income 3,585 3,470 3
Net sales of spawn and spawn-related products were $15.6 million for the quarter
ended October 3, 1999, a 3% improvement over the corresponding period in 1998.
Spawn product sales volume increased 6%, with a 9% increase in overseas markets
and with essentially no change in the Americas. Strong volume increases were
achieved during the quarter in France, Canada and Hungary. The overseas U.S.
dollar equivalent selling price was 6% lower during the current quarter,
primarily due to the strengthening of the U.S. dollar. The average selling price
in the Americas was 2% lower than that of the corresponding 1998 quarter. Sales
of disease-control agents and nutritional supplements, which accounted for 13%
of consolidated net sales for the third quarter of 1999, were consistent with
the same period of 1998.
Operating expenses increased proportionately with sales to $12.0 million during
the quarter ended October 3, 1999, versus $11.6 million during the 1998 period.
Within operating expenses, cost of sales, as a percentage of sales, was 50% for
the quarter ended October 3, 1999 as well as the corresponding period in 1998.
The remaining operating expenses increased by 4% to $4.2 million for the current
quarter.
Operating income increased by 3% to $3.6 million for the quarter ended October
3, 1999 from $3.5 million for the third quarter of 1998. For the third quarters
of both 1999 and 1998, operating income was 23% of sales.
Fresh Mushrooms Segment
- -----------------------
(dollars in thousands) 1999 1998 % Change
---- ---- --------
Sales $6,922 $7,500 (8)
Operating expenses 6,865 7,584 (9)
Operating income 57 (84) 168
Fresh mushroom sales decreased during the current quarter to $6.9 million, as
compared with $7.5 million for the same period in 1998. This decrease was due to
6% fewer pounds sold and a 1% decrease in the average selling price per pound.
The percentage of mushrooms sold through the fresh channel was 91% for the third
quarter of 1999 and 93% for the corresponding quarter of 1998. Highly
competitive market conditions exist in the southeastern United States and are
expected to continue into 2000.
The fresh mushroom cost of sales was $5.5 million, or 80% of sales, for the
third quarter of 1999, versus $6.1 million, or 81% of sales, for the
corresponding period of 1998. Beginning in the third quarter of 1998 and
continuing into the first quarter of 1999, Quincy experienced production
inefficiencies that contributed to production yield reductions, spreading a cost
structure that is primarily fixed in nature over fewer pounds. Production
efficiencies substantially improved in March 1999; however, during the third
quarter Quincy once again experienced production difficulties, which improved by
the end of the quarter.
The fresh mushroom operating income of 1%, as a percentage of sales, was
$141,000 higher than the 1% operating loss, as a percentage of sales, for the
corresponding 1998 quarter.
14
<PAGE> 15
RESULTS OF OPERATIONS (Nine Months Ended October 3, 1999 and September 27, 1998)
CONSOLIDATED REVIEW
Net Sales
- ---------
(dollars in thousands) 1999 1998 % Change
---- ---- --------
Net sales $65,642 $65,275 1
Net sales for the nine months ended October 3, 1999 were $65.6 million, a 1%
increase over the $65.3 million reported for the corresponding 1998 period.
International sales for the current nine-month period were 50%, up from 47% for
the nine months ended September 27, 1998. The U.S. dollar was approximately 4%
stronger at the end of the current period, when measured in terms of the
company's applicable foreign currencies, than at the end of the first nine
months of 1998. This strengthening of the U.S. dollar had the effect of
decreasing sales for the current nine-month period by approximately $1.6
million.
Operating Costs and Expenses
- ----------------------------
(dollars in thousands) 1999 1998 % Change
---- ---- --------
Cost of sales $38,561 $38,045 1
Selling, administration, 15,653 14,753 6
research and development
Depreciation 4,088 3,849 6
The company's cost of sales, expressed as a percentage of sales, was 58.7% for
the first nine months of 1999, versus 58.3% for the corresponding 1998 period.
The company expensed approximately $220,000 during the current period in
connection with the replacement of the blender that was removed from service at
the Australian facility. Excluding this charge, the cost of sales percentage for
the current period was 58.4%. Selling, administration, research and development
expenses increased to $15.7 million, or 23.8% of sales, as compared with $14.8
million, or 22.6% of sales, for the corresponding 1998 period. Much of this
increase relates to increased professional fees, additional bad debt reserves,
the May 1998 acquisition of International Mushrooms Ltd. and increased employee
medical insurance amounts recorded during the first quarter of 1999.
Depreciation expense for the current nine-month period was $4.1 million,
$239,000 higher than the $3.8 million for the corresponding period of 1998.
Interest Expense
- ----------------
The company's net interest expense for the nine months ended October 3, 1999 was
$1.7 million, $36,000 higher than that of the corresponding nine-month period of
1998. The effective borrowing rate for the current period was 6.5%, as compared
with 6.9% for the first nine months of 1998. Increases in total borrowing costs,
resulting from higher levels of indebtedness, were offset by the lower effective
interest rate.
Income Tax Expense
- ------------------
The effective income tax rate was 27% for the current period, as compared with
29% for the corresponding 1998 period. The proportion of fresh mushroom
earnings, compared with total earnings, had the effect of decreasing the
consolidated income tax rate.
15
<PAGE> 16
BUSINESS SEGMENTS
Spawn Products Segment
- ----------------------
(dollars in thousands) 1999 1998 % Change
---- ---- --------
Sales, including intersegment $44,956 $42,810 5
Operating expenses 35,785 33,152 8
Operating income 9,171 9,658 (5)
Net sales of spawn and spawn-related products were $45.0 million for the nine
months ended October 3, 1999, a 5% improvement over the corresponding period in
1998. Spawn product sales volume increased by 6%, with an 8% increase in
overseas markets and a 3% increase in the Americas. Strong volume increases were
achieved during the nine-month period in France, Canada, South Africa and
Australia. The overseas U.S. dollar equivalent selling price was 4% lower as
local currency selling price increases were more than offset by the effect of
the continued strengthening of the U.S. dollar. The average selling price in the
Americas was equivalent to that of the corresponding 1998 period. Sales of
disease-control agents and nutritional supplements accounted for 13% of
consolidated net sales, which was consistent with the corresponding period of
1998.
Operating expenses were $35.8 million during the first nine months of 1999.
Within operating expenses, cost of sales increased by 9% to $23.2 million, or
52% of sales, versus $21.4 million, or 50% of sales, for the corresponding 1998
period. This increase is primarily due to the $220,000 nonrecurring charge taken
during the second quarter in connection with the replacement of the blender that
was removed from service at the Australian facility, and decreased margins on
nutritional supplements. The increased administrative charges mentioned in the
nine-month consolidated review accounted for most of the increase in the
remaining operating expenses, which totaled $12.6 million for the current
period.
Operating income declined to 20% of sales during the first nine months of 1999,
versus 23% for the corresponding period of 1998.
Fresh Mushrooms Segment
- -----------------------
(dollars in thousands) 1999 1998 % Change
---- ---- --------
Sales $21,610 $23,301 (7)
Operating expenses 20,703 21,890 (5)
Operating income 907 1,411 (36)
Fresh mushroom sales decreased 7% to $21.6 million for the first nine months of
1999, as compared with $23.3 million for the corresponding period in 1998. This
decrease was due to 6% fewer pounds sold and a 1% decrease in average selling
price per pound. The percentage of mushrooms sold through the fresh channel was
89% for the current period of 1999 and 92% for the corresponding period of 1998.
Highly competitive market conditions exist in the southeastern United States and
are expected to continue into 2000.
The fresh mushroom cost of sales was $16.3 million for the first nine months of
1999, as compared with $17.5 million for the corresponding period of 1998. Much
of the $1.2 million decrease in the current period was due to Quincy purchasing
lower quantities of third-party produced mushrooms on the open market, as
compared with the prior-year period. The cost of sales, as a percentage of
sales, was 75% for both the 1999 and 1998 nine-month periods. Beginning in the
third quarter of 1998 and continuing into the first quarter of 1999, Quincy
experienced production inefficiencies that contributed to production yield
reductions, spreading a cost structure that is primarily fixed in nature over
fewer pounds. Production efficiencies substantially improved in March 1999;
however, during the third quarter Quincy once again experienced production
difficulties, which improved by the end of the quarter.
16
<PAGE> 17
Fresh mushroom operating income was 4% as a percentage of sales, or $.9 million,
for the current nine-month period, as compared with 6%, or $1.4 million, for the
corresponding nine months of 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine months ended October 3,
1999 was $9.7 million, an increase of $3.2 million over the $6.5 million
provided for the nine months ended September 27, 1998. Employee benefit accruals
increased by $.7 million for the nine months ended October 3, 1999, as compared
with the $.4 million decrease during the corresponding 1998 period, due to a
change in the timing of funding certain employee benefits. Trade accounts
receivable contributed $.5 million to operating cash flow for the 1999
nine-month period, as compared with $1.6 million for the nine months ended
September 27, 1998. During 1999, the spawn products segment experienced a
reduction in its trade accounts receivable balance through management's efforts
to reduce overall receivable exposures. For the 1998 period, the majority of the
change was related to the collection of accounts receivable of a French
subsidiary acquired in December 1997.
Inventories increased by $.3 million during the nine months ended October 3,
1999, as compared with an increase of $1.7 million during the 1998 corresponding
period. Relatively minor variations occurred within the inventories during 1999;
whereas, during the nine months ended September 27, 1998, the company
significantly increased inventory levels within its North American spawn
business. Accounts payable and accrued liabilities decreased by $1.2 million
during the first nine months of 1999 due to payments made to contractors, which
had been held back pending the satisfactory completion of equipment start-up
tests at the French inoculum laboratory, and due to litigation settlements. The
majority of the net decrease of $2.1 million during the nine months ended
September 27, 1998 resulted from the settlement of trade payables in a French
subsidiary acquired in December 1997.
Cash used by investing activities was $5.7 million for the nine months ended
October 3, 1999, versus the $6.6 million used during the corresponding period of
1998. During the quarter ended October 3, 1999 plant modifications, including
installation of blender technology, commenced in Ireland. Other significant
capital projects during 1999 included the continued construction and completion
of a spawn production facility in South Africa, a replacement blender in
Australia, upgrading chilling equipment at Quincy, additional cold store
capacity in the Netherlands and additional equipment for the company's
biological products operation. Capital expenditures in 1999 are expected to
total between $6 million and $8 million for existing operations, with additional
expenditures for any acquisitions or new initiatives. The company believes that
it has sufficient cash resources from current cash balances, internally
generated funds and available bank credit facilities to meet its ongoing capital
needs, including the expected fourth-quarter acquisition of the J.B. Swayne
Spawn Company.
Available credit under the company's revolving credit arrangement was $20.7
million as of October 3, 1999. Term debt and revolving credit increased $4.2
million during the nine months ended October 3, 1999, as compared with a
decrease of $.2 million during the corresponding period of 1998. Most of this
increase in revolving credit was due to the repurchase of $4.3 million of
treasury stock during the third quarter. During the first nine months of 1999,
the company repurchased 608,100 shares of its common stock at an average price
of $11.27 per share. By comparison, 59,025 shares were repurchased during the
first nine months of 1998 at an average price of $14.39 per share.
YEAR 2000 ISSUES
State of Readiness: Sylvan is currently executing an overall Year 2000
compliance strategy through an evaluation conducted by its business systems
department. The program consists essentially of addressing issues related to
four primary risk areas. These are:
o business information systems;
o company products and customers;
o third-party product and service providers; and
o facilities.
17
<PAGE> 18
Business Information Systems: Sylvan believes that, as a result of software
upgrades and computer system purchases, the computer systems of its sales,
production and administrative subsidiaries will either not have a Year 2000
problem or will be warranted to be Year 2000 compliant by third-party vendors by
the end of 1999.
Company Products and Customers: Exposures in production process areas relate
almost entirely to the presence of imbedded operating systems for spawn
production blenders and mushroom compost processing operations. The company
believes that its mushroom compost processing systems and spawn processing
imbedded systems in the United States are Year 2000 compliant. Software
modifications have been and are being implemented for some European imbedded
systems.
Because the company is in a narrowly structured industry, a substantial portion
of its revenues is derived from a small number of customers worldwide and, to
some extent, Sylvan's business is dependent upon the efforts of those entities
to address their own Year 2000 issues. However, the company believes that, due
to the fungible nature of the raw materials, supplies and services utilized by
Sylvan's customers and the relative ease of access to their customers and
markets, the risks of Year 2000 related disruptions for such third parties are
small and are not likely to have a material adverse effect on the company's
business, results of operations, equity or financial condition. The company will
continue to monitor this and other issues raised herein and respond accordingly.
Third-Party Product and Service Providers: The company believes that Year 2000
risk exposures relating to most of the raw materials and operating supplies used
in the production of the company's products are low due to their fungible
nature. Issues could, but are not expected to, exist with respect to the
company's ability to obtain certain limited use items from third parties, such
as packaging for spawn products. In addition, the company's production
facilities are dependent upon third-party suppliers of electricity, water and
other utilities. The company believes that brief interruptions of these services
will have little effect on its operations and that the risk of prolonged
interruptions to all nine of its geographically dispersed spawn plants is low.
Contingency plans have been formulated and are evaluated from time to time and,
if changes appear warranted, the company believes that they can be implemented
expeditiously.
Facilities: A review of issues related to the Year 2000 compliance of Sylvan's
facilities infrastructure has been completed and no major problems or
significant risks are anticipated.
Year 2000 Cost: The total cost for the company's Year 2000 compliance efforts is
currently estimated to be approximately $70,000. Most of the expenditures relate
to computer system installations and software upgrades and have been, or will
be, capitalized and charged to expense over the estimated useful life of the
associated software and hardware. Additional costs could be incurred if
significant remediation activities are required, particularly with respect to
third-party suppliers, but the company does not anticipate that such costs will
be material.
Risks and Contingency Plans: Based on the Year 2000 compliance work conducted to
date and described above, the company's most significant risk in its most likely
worst case scenario appears to be that, upon completion of its review of its
third-party product and service providers, certain of these suppliers may not be
compliant. Future operating results could be adversely affected, if such product
and service providers do not become compliant in a timely manner and cannot
provide Sylvan with the products and services that it requires in a timely and
cost-effective manner, and if the company is not able to obtain an inventory of
such items as spawn product packaging to deal with the compliance problems of
bag vendors. However, the company believes that its vendor management process
will identify these potential risks.
At this time, a formal contingency plan for dealing with third-party product and
service providers who are not Year 2000 compliant has not been developed because
Sylvan does not believe that these issues are sufficiently material to warrant
it and the company anticipates that potential supply interruptions can be
avoided as described below.
18
<PAGE> 19
The company believes that the raw materials, operating supplies and packaging
supplies that it requires are readily available from a number of suppliers and
that its service needs are not significantly different from those of other
companies. The company also believes that for most, if not all, of its suppliers
who may be identified as being noncompliant, various remediation strategies can
be employed with particular suppliers as an alternative to switching suppliers.
These remediation strategies include, but are not limited to, increasing
purchases from suppliers in question prior to January 1, 2000 to provide a
safety stock. Remediation strategies also include the development of plans to
implement production increases at plants that are not affected by utility
interruptions to make up most, if not all, of the production shortfalls at
plants that are affected by prolonged interruptions.
EURO CURRENCY
Sylvan does not believe that the conversion to the Euro has a material impact on
its business or financial condition.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
From time to time in this report and in other written reports and oral
statements, references are made to expectations regarding future performance of
the company. These "forward-looking statements" are based on currently available
competitive, financial and economic data and the company's operating plans, but
they are inherently uncertain. Events could turn out to be significantly
different from what is expected, depending upon such factors as mushroom raw
material production and growing process inconsistencies, specific pricing or
product initiatives of the company's competitors and competitive conditions in
the U.S. mushroom market in general, changes in currency and exchange risks, or
changes in a specific country's or region's political or economic conditions.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The information presented under this item in the company's Form 10-K for the
fiscal year ended January 3, 1999 has not changed materially. Information
relating to the sensitivity to foreign currency exchange rate changes of the
company's firmly committed sales transactions, in addition to what is presented
in Item 2 of this filing, is omitted because it is an immaterial portion of
total sales.
19
<PAGE> 20
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In March 1998, the company's Quincy subsidiary was served with a complaint filed
in the Circuit Court of the Second Judicial Circuit of Florida for Gadsden
County. The complaint sought compensation, including loss of earnings, for a
group of approximately 60 former Quincy employees who alleged that they were
illegally terminated in March 1996 as a result of their participation in
collective bargaining activities. Although the company believed that the
complaint and its claims were without merit, Quincy executed a settlement
agreement with the claimants in May 1999 that provided for Quincy's payment of
$420,000 to them and their attorneys and for the implementation of procedures to
reinstate the claimants' employment. The settlement was approved by final order
of the court dated July 6, 1999.
There are no other material pending legal proceedings to which Sylvan or any of
its subsidiaries is a party, or of which any of their property is subject, other
than ordinary, routine litigation incidental to their respective businesses.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
3.3 Articles of Incorporation of S. F. Nevada, Inc., filed on May 27,
1994 with the Secretary of State of the State of Nevada and
submitted herewith.
3.4 Articles of Merger of S. F. Nevada, Inc. (a Nevada Corporation)
and Sylvan Foods Holdings, Inc. (a Delaware Corporation) and
attached Exhibit A, filed on June 28, 1994 with the Secretary of
State of the State of Nevada and submitted herewith.
3.5 Bylaws, as amended June 28, 1994 and submitted herewith.
10.12 Sylvan Inc. 1990 Stock Option Plan, as amended and restated on
February 10, 1999 and as amended April 29, 1999 and submitted
herewith.
11 Statement re computation of per share earnings is not required
because the relevant computation can be clearly determined from
the material contained in the financial statements included
herein.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
20
<PAGE> 21
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 10, 1999 SYLVAN INC.
-------------------
By: /s/ Donald A. Smith
------------------------------
Donald A. Smith
Chief Financial Officer
By: /s/ Fred Y. Bennitt
------------------------------
Fred Y. Bennitt
Secretary/Treasurer
21
<PAGE> 22
INDEX TO EXHIBITS
Exhibit No. Description Page No.
- ----------- ----------- --------
3.3 Articles of Incorporation of S. F. Nevada, Inc.
3.4 Articles of Merger of S. F. Nevada, Inc. and
Sylvan Foods Holdings, Inc. with exhibit
3.5 Bylaws
10.12 1990 Stock Option Plan as amended and restated
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 3.3
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAY 27 1994
CHERYL A. LAU SECRETARY OF STATE
/s/ Cheryl A. Lau
No. 8145-94
---------------------
ARTICLES OF INCORPORATION
OF
S. F. NEVADA, INC.
a Nevada Corporation
KNOW ALL MEN BY THESE PRESENTS:
The undersigned incorporator has this day associated himself into a
corporation under and by virtue of the laws of the State of Nevada, and for the
purposes therein set forth as provided in Chapter 78 of Nevada Revised Statutes,
and hereby certifies:
ARTICLE I
NAME
The name of the Corporation is:
S. F. NEVADA, INC.
ARTICLE II
NAME AND LOCATION OF RESIDENT AGENT
The name and address of its Resident Agent is Robert C. Anderson, 245
East Liberty Street, Third Floor, Reno, Nevada 89501.
The Corporation may maintain offices at such places within or without
the State of Nevada as it may from time to time determine. Corporate business of
every kind and nature may be conducted, and meetings of Directors and
shareholders may be held outside the State of Nevada with the same effect as if
in the State of Nevada.
ARTICLE III
PURPOSE
The nature of the business or purpose of the Corporation is to engage
in any lawful act or activity for which corporations may be organized under the
laws of the State of Nevada. The
1
<PAGE> 2
Corporation shall possess and exercise all the powers and privileges granted by
the laws of the State of Nevada, by any other law or by these Articles of
Incorporation, together with any powers incidental thereto as far as such powers
and privileges are necessary or convenient to the conduct, promotion or
attainment of the purposes of the Corporation.
ARTICLE IV
CAPITAL STOCK
1. Authorized Number and Classes of Stock. The total number of shares
which the Corporation shall have authority to issue is 11,000,000 shares of
capital stock as follows:
10,000,000 shares of Common Stock, par value $.001 per share; and
1,000,000 shares of Preferred Stock, par value $.01 per share
2. Common Stock.
The powers, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions with
respect thereto, of the shares of Common Stock are set forth below.
a. Dividends. The holders of outstanding shares of Common Stock
shall be entitled to share equally and ratably with all other
holders of shares of Common Stock then outstanding in any dividends
or distributions declared on outstanding shares of Common Stock,
when, as and if any such dividends or distributions are declared by
the Corporation's Board of Directors from funds legally available
therefor.
b. Liquidation. etc. The holders of outstanding shares of Common
Stock shall be entitled to share equally and ratably with all other
holders of Common Stock then outstanding in the assets of the
Corporation to be distributed among the holders of shares of the
Common Stock upon any liquidation or winding up of the Corporation,
whether voluntary or involuntary.
c. Voting Rights. Each holder of Common Stock shall be entitled to
vote for the election and removal of the directors of the
Corporation and on all other matters on which stockholders are
entitled to vote under the
2
<PAGE> 3
laws of the State of Nevada and shall have one (1) vote for each
share of Common Stock held of record.
3. Preferred Stock. Shares of Preferred Stock may be issued in one or
more series as the Board of Directors may determine. Authority is hereby
expressly vested in the Board of Directors to fix from time to time, by
resolution or resolutions providing for the issue of any series of Preferred
Stock, the designation of such series and the powers, preferences and rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof, including the following:
a. The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the
Board of Directors authorizing such series) be increased or
decreased (but not below the number of shares then outstanding) from
time to time by like action of the Board of Directors;
b. The dividend rate or rates, if any, on the shares of such series
and the preferences, if any, over any other series (or of any other
series over such series) with respect to any dividends, the terms
and conditions upon which any dividends shall be payable, whether
and upon what conditions any such dividends shall be cumulative and,
if cumulative, the date or dates from which any dividends shall
accumulate;
c. Whether or not the shares of such series shall be redeemable, the
price or prices, limitations and restrictions, and any other terms
and conditions with respect to such redemptions;
d. The rights to which the holders of such series shall be entitled,
and the preferences, if any, over any other series (or of any other
series over such series), upon the voluntary or involuntary
liquidation, dissolution or winding up of the corporation;
e. Whether or not the shares of such series shall be subject to the
operation of a purchase, retirement or sinking fund, and, if so,
whether and upon what conditions such purchase, retirement or
sinking fund shall be cumulative or noncumulative, the extent to
which and the manner in which such fund shall be applied to the
purchase or redemption of the shares of such series for retirement
or to other corporate purposes and the terms and provisions relative
to the operation thereof;
f. Whether or not the shares of such series shall be convertible
into or exchangeable for shares of stock of any other class or
classes, or of any other series of the same class and, if so
convertible or exchangeable, the
3
<PAGE> 4
price or prices or the rate or rates of conversion or exchange and
the method, if any, of adjusting the same, and any other terms and
conditions of such conversion or exchange;
g. The voting powers, if any, of the shares of such series; and
whether or not and under what conditions the shares of such series
shall be entitled to vote separately as a single class for the
election of one or more additional directors of the corporation in
case of dividend arrearage or other specified events, or upon other
matters; and
h. Any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of
Directors, or any Executive Committee thereof, may deem advisable
and as shall not be inconsistent with the provisions of these
Articles of Incorporation.
Shares of Preferred Stock which are redeemed or converted, or which are issued
and reacquired in any manner and retired, shall be retired and restored to the
status of authorized and unissued Preferred Stock and may be reissued by the
Board of Directors as shares of the same or any other series, unless otherwise
provided with respect to any series in the resolution of the Board of Directors
creating such series.
ARTICLE V
NO ASSESSMENT OF STOCK
The capital stock of this Corporation, when issued and delivered, shall
be conclusively deemed to have been paid for in full, and the capital stock of
the Corporation shall not be subject to assessment to pay for the debts of the
Corporation, or for any other reason, after the subscription price has been
paid.
ARTICLE VI
DIRECTORS
The members of the governing board of the Corporation shall be styled
"Directors" and the first Board of the Corporation shall be SIX (6) in number.
The number of Directors shall not be reduced to less than ONE (1), and
may, at any time or times, be increased to a number not to exceed FIFTEEN (15)
or decreased by a duly adopted amendment to the Articles of Incorporation or in
such manner as shall be provided in the Bylaws
4
<PAGE> 5
of the Corporation or by an amendment to the Bylaws of the Corporation duly
adopted by either the Board of Directors or the shareholders.
The names and residence or business addresses of the first Board of
Directors are as follows:
NAME ADDRESS
Virgil H. Jurgensmeyer J & M Farms, Inc.
Route 2, Box 15
Miami, Oklahoma 74354
Gilbert H. Lamphere Noel Group, Inc.
667 Madison Ave.
New York, New York 10021
Richard F. Lazzarini, Jr. Quincy Corporation
Route 4, Box 245
Quincy, Florida 32351
Donald T. Pascal Noel Group, Inc.
667 Madison Ave.
New York, New York 10021
Samuel F. Pryor, IV Noel Group, Inc.
667 Madison Ave.
New York, New York 10021
Dennis C. Zensen Quincy Corporation
Route 4, Box 245
Quincy, Florida 32351
ARTICLE VII
LIMITATION OF DIRECTOR AND OFFICER LIABILITY
No Director or officer of the Corporation shall be personally liable to
the Corporation or its shareholders for damages for breach of their fiduciary
duty as a Director or officer;
5
<PAGE> 6
provided, however, that this Article VII shall not eliminate or limit the
liability of a Director or officer for (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law; or (ii) authorizing
the unlawful payment of distributions in violation of Nevada Revised Statutes
Section 78.300.
ARTICLE VIII
INCORPORATORS
The name and residence or business address of the incorporator and
subscriber to these Articles of Incorporation is as follows:
NAME ADDRESS
Blayne L. Asher, Jr. 245 E. Liberty Street, Third Floor
Reno, Nevada 89501
ARTICLE IX
PROPERTY OF SHAREHOLDERS EXEMPT
The private property of the shareholders of the Corporation shall be,
and hereby is, made forever exempt from liability for debts or obligations of
the Corporation.
ARTICLE X
DURATION
The duration of this Corporation shall be perpetual.
ARTICLE XI
AMENDMENT
The Corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation from time to time and at any time
in the manner now or hereafter prescribed by the law of the State of Nevada, and
all rights herein conferred upon stockholders, Directors and officers are
subject to this reserved power.
6
<PAGE> 7
ARTICLE XII
REORGANIZATION
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Nevada may, on the application in a summary way
of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation or on
the application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation, order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders of the class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors and/or on
all the stockholders or class of stockholders of this Corporation, as the case
may be, and also on this Corporation.
ARTICLE XIII
INDEMNIFICATION
Any person made a party to any action, suit or proceeding by reason of
the fact that he, his testator or intestate, is or was a Director, officer or
employee of the Corporation or of any Corporation which he served as such at the
request of the Corporation, shall be indemnified by the Corporation against all
expenses and other amounts for which indemnification may be made under law. The
indemnification provided for herein shall be made at the times, in the manner
and to the extent provided by law.
ARTICLE XIV
INAPPLICABILITY OF CONTROLLING INTEREST AND
BUSINESS COMBINATION PROVISIONS OF NEVADA LAW
The provisions of Sections 78.378 to 78.3793 and 78.411 to 78.444, all
inclusive, of Nevada Revised Statutes shall not apply to the Corporation.
7
<PAGE> 8
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of May,
1994.
/s/ Blayne L. Asher, Jr.
----------------------------------
Blayne L. Asher, Jr.
STATE OF NEVADA )
)ss.
COUNTY OF WASHOE )
On this 27th day of May, 1994, before me a Notary Public duly
commissioned and sworn, personally appeared Blayne L. Asher, Jr., personally
known (or proved) to me to be the person whose name is subscribed to the within
instrument and who acknowledged to me that he has read the foregoing Articles of
Incorporation, knows the contents thereof and executed the same freely and
voluntarily for the intents and purposes therein mentioned.
/s/ Victoria L. Allen
--------------------------------
NOTARY PUBLIC
VICTORIA L. ALLEN
[SEAL] NOTARY PUBLIC - STATE OF NEVADA
Appointment Recorded in Storey County
MY APPOINTMENT EXPIRES AUG. 24, 1997
8
<PAGE> 9
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAY 27 1994
CHERYL A. LAU SECRETARY OF STATE
/s/ Cheryl A. Lau
No. 8145-94
---------------------
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT OF RESIDENT AGENT
I, ROBERT C. ANDERSON, hereby certify that on the 27th day of May,
1994, I accepted the appointment as Resident Agent of S. F. NEVADA, INC. in
accordance with Nevada Revised Statutes Chapter 78, Sections 78.030 and 78.090.
Furthermore, that the registered office in this State is located at 245
East Liberty Street, Third Floor, Reno, Nevada 89501.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of May,
1994.
/s/ Robert C. Anderson
-----------------------------
Robert C. Anderson
<PAGE> 1
EXHIBIT 3.4
FILED ARTICLES OF MERGER
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE S. F. NEVADA, INC.,
STATE OF NEVADA A Nevada Corporation
(Surviving Corporation)
JUN 28 1994
CHERYL A. LAU and
SECRETARY OF STATE
SYLVAN FOODS HOLDINGS, INC.,
A Delaware Corporation
/s/ Cheryl A. Lau
No. 8145-94
---------------------
In compliance with the requirements of Nevada Revised Statutes Section
78.458 and Section 1108 of the Delaware General Corporation Law, the undersigned
corporations, desiring to effect a merger, hereby certify that:
1. The constituent corporations to the merger are S. F. Nevada, Inc., a
Nevada corporation ["S. F. Nevada, Inc."], which is also the surviving
corporation, and SYLVAN FOODS HOLDINGS, INC., a Delaware corporation ["SYLVAN
FOODS HOLDINGS, INC."].
2. An Agreement and Plan of Merger, adopted by the Board of Directors
of each corporation that is a party to this merger is attached hereto as Exhibit
"A".
3. The Plan and Agreement of Merger is to be effective on the 1st day
of July, 1994 , at 12:01 am.
4. The Plan and Agreement of Merger was submitted to the stockholders
by the Board of Directors of each of the constituent corporations and
unanimously approved by the shareholders of each corporation:
<TABLE>
<CAPTION>
Shares Approved Objected
Outstanding Merger to Merger
----------- ------ ---------
<S> <C> <C> <C>
S. F. Nevada, Inc.,
a Nevada corporation 1 1 -0-
SYLVAN FOODS HOLDINGS, Inc.,
a Delaware corporation, Common shares. 6,194,053 5,142,320 20,312
SYLVAN FOODS HOLDINGS, Inc.,
a Delaware corporation, Preferred shares. -0-
</TABLE>
5. Article I of the Articles of Incorporation of the surviving
corporation shall be amended as of the effective date to read as follows:
Page 1
<PAGE> 2
"The name of the Corporation is Sylvan Inc."
6. The Plan and Agreement of Merger, the performance of the terms
thereunder, and the approval thereof, has been authorized by all action required
by the laws under which each of the constituent corporations has been
incorporated or organized and by their respective constituent documents.
We declare under penalty of perjury under the laws of the States of
Nevada and Delaware that the foregoing matters stated in the Articles of Merger
are true and correct to the best of our knowledge.
Executed at Sarver, Pennsylvania, on this 14th day of June , 1994.
S. F. NEVADA, INC.,
A NEVADA CORPORATION
By: /s/ Dennis C. Zensen
------------------------------------
"Dennis C. Zensen, President
STATE OF PENNSYLVANIA )
) ss.
COUNTY OF BUTLER )
On this l4th day of June, 1994, personally appeared before me, a notary
public, DENNIS C. ZENSEN, known (or proved) to me to be the President of S. F.
Nevada, Inc., a Nevada corporation, and upon oath, he did depose and say that he
is the officer of the corporation as above designated, that the signature to the
instrument was made by an officer of the corporation as indicated after the
signature, and acknowledged to me that the corporation executed the instrument
freely and voluntarily for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
/s/ Louise O. Allen
----------------------------------
Notary Public
-------------------------------------------
Notarial Seal
Louise 0. Allen, Notary Pubic
Buffalo Twp., Butler County
My Commission Expires Dec 22, 1997
-------------------------------------------
Member Pennsylvania Association of Notaries
Page 2
<PAGE> 3
S. F. NEVADA, INC.,
a Nevada Corporation
By: /s/ Fred Y. Bennitt
-------------------------------
Fred Y. Bennitt, Secretary
STATE OF PENNSYLVANIA )
) ss.
COUNTY OF BUTLER )
On this 14th day of June, 1994, personally appeared before me, a notary
public, FRED Y. BENNITT, known (or proved) to me to be the Secretary of S. F.
Nevada, Inc., a Nevada Corporation, and upon oath, he did depose and say that he
is the officer of the corporation as above designated, that the signature to the
instrument was made by an officer of the corporation as indicated after the
signature, and acknowledged to me that the corporation executed the instrument
freely and voluntarily for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
/s/ Louise O. Allen
----------------------------------
Notary Public
-------------------------------------------
Notarial Seal
Louise 0. Allen, Notary Pubic
Buffalo Twp., Butler County
My Commission Expires Dec 22, 1997
-------------------------------------------
Member Pennsylvania Association of Notaries
Page 3
<PAGE> 4
SYLVAN FOODS HOLDINGS, INC.,
a Delaware Corporation
By: /s/ Dennis C. Zensen
------------------------------------
Dennis C. Zensen, President
STATE OF PENNSYLVANIA )
) ss.
COUNTY OF BUTLER )
On this 14th day of June, 1994, personally appeared before me, a notary
public, DENNIS C. ZENSEN, known (or proved) to me to be the President of SYLVAN
FOODS HOLDINGS, INC., a Delaware Corporation, and upon oath, he did depose and
say that he is the officer of the corporation as above designated, that the
signature to the instrument was made by an officer of the corporation as
indicated after the signature, and acknowledged to me that the corporation
executed the instrument freely and voluntarily for the uses and purposes therein
mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
/s/ Louise O. Allen
----------------------------------
Notary Public
-------------------------------------------
Notarial Seal
Louise 0. Allen, Notary Pubic
Buffalo Twp., Butler County
My Commission Expires Dec 22, 1997
-------------------------------------------
Member Pennsylvania Association of Notaries
Page 4
<PAGE> 5
SYLVAN FOODS HOLDINGS, INC.,
a Delaware Corporation
By: /s/ Fred Y. Bennitt
------------------------------------
Fred Y. Bennitt, Secretary
STATE OF PENNSYLVANIA )
) ss.
COUNTY OF BUTLER )
On this 14th day of June, 1994, personally appeared before me, a notary
public, FRED Y. BENNITT, known (or proved) to me to be the Secretary of SYLVAN
FOODS HOLDINGS, INC., a Delaware Corporation, and upon oath, he did depose and
say that he is the officer of the corporation as above designated, that the
signature to the instrument was made by an officer of the corporation as
indicated after the signature, and acknowledged to me that the corporation
executed the instrument freely and voluntarily for the uses and purposes therein
mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
/s/ Louise O. Allen
----------------------------------
Notary Public
-------------------------------------------
Notarial Seal
Louise 0. Allen, Notary Pubic
Buffalo Twp., Butler County
My Commission Expires Dec 22, 1997
-------------------------------------------
Member Pennsylvania Association of Notaries
Page 5
<PAGE> 6
Exhibit A to Articles of Merger
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of this 14th day of
June 1994 by and between S. F. NEVADA, INC., a Nevada corporation ("Sylvan
Nevada" or the "Surviving Corporation"), and SYLVAN FOODS HOLDINGS, INC., a
Delaware corporation ("Holdings") (Sylvan Nevada and Holdings being herein
sometimes collectively referred to as the "Constituent Corporations").
WITNESSETH:
WHEREAS, the Constituent Corporations desire that, in order to facilitate a mere
change in identity and place of organization of Holdings, to minimize any state
taxes imposed on Holdings, and to minimize the administrative expense incurred
in the operations of Holdings, Holdings be merged with and into Sylvan Nevada,
with Sylvan Nevada being the surviving corporation, upon the terms and
conditions set forth herein and in accordance with Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended;
WHEREAS, Sylvan Nevada was created solely for the purpose of facilitating a mere
change in identity and place of organization of Holdings, has heretofore been a
nonoperating entity and subsequent hereto will operate in the same line of
business as Holdings and carry on the same business activities of Holdings;
WHEREAS, the Board of Directors and stockholders of Holdings have adopted
resolutions approving this Plan of Merger in accordance with the Delaware
General Corporation Law (the "Delaware GCL"); and
WHEREAS, the Board of Directors and stockholders of Sylvan Nevada have adopted
resolutions approving this Plan of Merger in accordance with the General
Corporation Law of Nevada (the "Nevada GCL").
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, and intending to be legally bound hereby, Holdings and Sylvan Nevada
hereby agree as follows:
1. Terms of Merger. On the Effective Date (as hereinafter defined),
Holdings shall be merged with and into Sylvan Nevada pursuant to the provisions
of Section 78.461 of the Nevada GCL (the "Merger").
2. Surviving Corporation. The corporation surviving the Merger shall be
Sylvan Nevada.
3. Treatment of Shares.
(a) Upon the Effective Date, each share of Common Stock, par
value $.OO1 per share, of Holdings ("Holdings Common Stock") that is issued and
outstanding or held in the treasury of Holdings immediately prior to the Merger
shall, by virtue of the Merger and without
<PAGE> 7
any action on the part of the holder thereof, be deemed converted into one share
of Common Stock, par value $.001 per share, of Sylvan Nevada ("Sylvan Nevada
Common Stock").
(b) Upon the Effective Date, Holdings' 1990 Stock Option Plan (the
"1990 Plan") and 1993 Stock Option Plan for Nonemployee Directors (the "1993
Plan") shall automatically, and without any further action, be assumed by and
shall become stock option plans of Sylvan Nevada Accordingly, each outstanding
option to purchase shares of Holdings Common Stock under the 1990 Plan and the
1993 Plan shall be converted into and become an option to purchase an equal
number of shares of Sylvan Nevada Common Stock. Each such option shall be upon
the same terms and conditions and shall have the same provisions that were
applicable thereto immediately prior to the Effective Date. Similarly, each
share of Holdings Common Stock reserved for issuance pursuant to the 1990 Plan
and the 1993 Plan but not yet covered by an option shall be converted into a
share of Sylvan Nevada Common Stock.
(c) All outstanding rights (including preemptive rights) shall
automatically, and without any further action, continue outstanding as a right
to purchase, in lieu of the right to purchase each share of Holdings Common
Stock, a share of Sylvan Nevada Common Stock upon the same terms and conditions
as applicable immediately prior to the Effective Date under the relevant rights.
(d) No exchange of certificates representing shares of Holdings Common
Stock converted pursuant to Section 3(a) above shall be required; and from and
after the Effective Date and until certificates representing such Holdings
Common Stock are presented for exchange or registration of transfer, all such
certificates shall be deemed for all purposes to represent the same number of
shares of Sylvan Nevada Common Stock into which they were so converted. After
the Effective Date, whenever certificates which formerly represented shares of
Holdings Common Stock are presented for exchange or registration of transfer,
Sylvan Nevada will cause to be issued in respect thereof certificates
representing an equal number of shares of Sylvan Nevada Common Stock. If any
certificate representing Sylvan Nevada Common Stock is to be issued in a name
other than that of the registered holder of the certificate representing
Holdings Common Stock presented, it shall be a condition of issuance that (i)
the certificate so surrendered shall be properly endorsed or accompanied by a
stock power and shall otherwise be in proper form for transfer and (ii) the
person requesting such issuance shall pay to Sylvan Nevada or its transfer agent
any transfer or other taxes required by reason of the issuance of certificates
representing Sylvan Nevada Common Stock in a name other than that of the
registered holder of the certificate presented, or establish to the satisfaction
of Sylvan Nevada or its transfer agent that such taxes have been paid or are not
applicable.
4. Effective Date. If this Agreement is not terminated as contemplated
by Section 8 hereof, (i) Articles of Merger (the "Articles of Merger"), executed
in accordance with the Nevada GCL, shall be delivered to the appropriate Nevada
state officials for filing and (ii) a Certificate of Merger, executed in
accordance with the Delaware GCL, shall be delivered to the appropriate Delaware
state officials for filing. The Merger shall become effective upon the filing of
the Articles of Merger with the Secretary of State of Nevada (the "Effective
Date").
<PAGE> 8
5. Articles of Incorporation. The Articles of Incorporation of Sylvan
Nevada as in effect on the Effective Date, as hereinafter amended by this
Section 5, from and after the Effective Date and until further amended as
provided by applicable law, shall be, and may be separately certified as, the
Articles of Incorporation of the Surviving Corporation. As of the Effective
Date, the Articles of Incorporation of Sylvan Nevada shall be amended by
changing Article 1 thereof so that, as amended, said Article shall be and read
as follows:
"The name of the Corporation is Sylvan Inc."
6. Bylaws. The Bylaws of Sylvan Nevada, as in effect on the Effective
Date, shall be the Bylaws of the Surviving Corporation, to remain unchanged
until amended in accordance with the provisions thereof and of applicable law.
7. Directors and Officers. Upon the Effective Date, the Board of
Directors of the Surviving Corporation shall consist of those persons who were
directors of Holdings immediately prior to the Effective Date, and the officers
of the Surviving Corporation shall be the persons who were officers of Holdings
immediately prior to the Effective Date, each such person to hold, in accordance
with the Bylaws and at the pleasure of the Board of Directors of the Surviving
Corporation, the same office or offices with the Surviving Corporation as he or
she then held with Holdings.
8. Termination and Amendment. This Agreement may be terminated by the
Board of Directors of either Sylvan Nevada or Holdings at any time prior to the
Effective Date. In addition, the Boards of Directors of Sylvan Nevada and
Holdings may amend this Agreement at any time prior to the Effective Date;
provided, however, that no such amendment not adopted and approved by the
stockholders shall affect the rights of the stockholders of Holdings in a manner
which is materially adverse to Holdings stockholders, in the sole judgment of
the Board of Directors of Holdings.
9. Miscellaneous. Upon the Effective Date, all the property, rights,
privileges, franchises, patents, trademarks, licenses, registrations and other
assets of every kind and description of Holdings shall be transferred to, vested
in and devolve upon Sylvan Nevada without further act or deed and all property,
rights, and every other interest of Sylvan Nevada and Holdings shall be as
effectively the property of Sylvan Nevada as they were of Sylvan Nevada and
Holdings, respectively. Holdings hereby agrees from time to time, as and when
requested by Sylvan Nevada or by its successors or assigns, to execute and
deliver or cause to be executed and delivered all such deeds and instruments and
to take or cause to be taken such further or other action as Sylvan Nevada may
deem necessary or desirable in order to vest in and confirm to Sylvan Nevada
title to and possession of any property of Holdings acquired or to be acquired
by reason of or as a result of the Merger herein provided for and otherwise to
carry out the intent and purposes hereof and the proper officers and directors
of Holdings and the proper officers and directors of Sylvan Nevada are fully
authorized in the name of Holdings or otherwise to take any and all such action.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of Delaware.
<PAGE> 9
IN WITNESS WHEREOF, Sylvan Nevada and Holdings have caused this Agreement to be
executed by their respective Presidents or Vice Presidents and attested by their
respective Secretaries or Assistant Secretaries all as of the date first above
written.
ATTEST: S. F. NEVADA, INC.
/s/ Fred Y. Bennitt By: /s/ Dennis C. Zensen
- ------------------------------- -----------------------------
Secretary President
ATTEST: SYLVAN FOODS HOLDINGS, INC.
/s/ Fred Y. Bennitt By: /s/ Dennis C. Zensen
- ------------------------------- -----------------------------
Secretary President
<PAGE> 10
ACKNOWLEDGMENT
THE UNDERSIGNED, President of S. F. NEVADA, INC., who executed on behalf of said
corporation the foregoing Agreement and Plan of Merger, of which this
Acknowledgment is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Agreement and Plan of Merger to be the corporate
act of said corporation and further certifies that, to the best of his
knowledge, information and belief the matters and facts set forth therein are
true in all material respects.
/s/ Dennis C. Zensen
----------------------------
ACKNOWLEDGMENT
THE UNDERSIGNED, President of SYLVAN FOODS HOLDINGS, INC. who executed on behalf
of said corporation the foregoing Agreement and Plan of Merger, of which this
Acknowledgment is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Agreement and Plan of Merger to be the corporate
act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein are
true in all material respects.
/s/ Dennis C. Zensen
----------------------------
<PAGE> 1
EXHIBIT 3.5
BYLAWS OF
SYLVAN INC.
ARTICLE 1. MEETING OF STOCKHOLDERS
Section 1.1 Annual Meetings The annual meeting of stockholders for the
election of directors and for the transaction of such other business as properly
may come before such meeting shall be held each year on such date, and at such
time and place, within or without the State of Nevada, as may be designated by
the Board of Directors.
Section 1.2 Special Meetings Special meetings of the stockholders for
any proper purpose or purposes may be called at any time by the Board of
Directors, the Chairman of the Board, the President or any Vice President, to be
held on such date, and at such time and place within or without the State of
Nevada, as the Board of Directors, the Chairman of the Board, the President or
any Vice President, whichever has called the meeting, shall direct. A special
meeting of the stockholders shall be called by the Chairman of the Board, the
President or any Vice President whenever stockholders owning a majority of the
shares of the Corporation then issued and outstanding and entitled to vote on
matters to be submitted to stockholders of the Corporation shall make
application therefor in writing. Any such written request shall state a proper
purpose or purposes of the meeting and shall be delivered to the Chairman of the
Board, the President or any Vice President.
Section 1.3 Notice of Meeting Written notice, signed by the Chairman of
the Board, the President, any Vice President, the Secretary or an Assistant
Secretary, of every meeting of stockholders, stating the date and time when, and
the place where, it is to be held, shall be delivered either personally or by
mail to each stockholder entitled to vote at such meeting not less than ten nor
more than sixty days before the meeting, except as otherwise provided by law.
The purpose or purposes for which the meeting is called may in the case of an
annual meeting, and shall in the case of a special meeting, also be stated. If
mailed, such notice shall be directed to a stockholder at his or her address as
it shall appear on the stock books of the Corporation, unless he or she shall
have filed with the Secretary a written request that notices intended for him or
her be mailed to some other address, in which case it shall be mailed to the
address designated in such request.
Section 1.4 Quorum The presence at any meeting, in person or by proxy,
of the holders of record of a majority of the shares then issued and outstanding
and entitled to vote shall be necessary and sufficient to constitute a quorum
for the transaction of business, except as otherwise provided by law.
Section 1.5 Adjournments In the absence of a quorum, a majority in
interest of the stockholders entitled to vote, present in person or by proxy,
or, if no stockholder entitled to vote is present in person or by proxy, any
officer entitled to preside at or act as secretary of such meeting, may adjourn
the meeting from time to time until a quorum shall be present.
Section 1.6 Order of Business
(a) At any annual meeting of the stockholders, only such
business shall be conducted as shall have been brought before the annual meeting
(i) by or at the direction of the Board of Directors or (ii) by any stockholder
who complies with the procedures set forth in this Section 1.6.
(b) For business properly to be brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than thirty days nor
more than sixty days prior to the annual meeting; provided, however, that
1
<PAGE> 2
in the event that less than forty days' notice or prior public disclosure of the
date of the annual meeting is given or made to stockholders, notice by the
stockholder to be timely must be received no later than the close of business on
the tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. To be in proper written
form, a stockholder's notice to the Secretary shall set forth in writing as to
each matter the stockholder proposes to bring before the annual meeting, (i) a
brief description of the business desired to be brought before the annual
meeting; (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business; (iii) the class and number of shares
of the Corporation which are beneficially owned by the stockholder; and (iv) any
material interest of the stockholder in such business. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Section 1.6.
The chairman of an annual meeting shall, if the facts warrant, determine and
declare to the annual meeting that business was not properly brought before the
annual meeting in accordance with the provisions of this Section 1.6 and, if he
should so determine, he shall so declare to the annual meeting and any such
business not properly brought before the annual meeting shall not be transacted.
Section 1.7 Voting Directors shall be chosen by a plurality of the
votes cast at the election, and, except as otherwise provided by law, all
questions shall be determined by a majority of the votes cast on such question.
Section 1.8 Proxies Any stockholder entitled to vote may vote by proxy,
provided that the instrument authorizing such proxy to act shall have been
executed in writing (which shall include telegraphing or cabling) by the
stockholder himself or by his or her duly authorized attorney.
Section 1.9 Judges of Election The Board of Directors may appoint
judges of election to serve at any election of directors and at balloting on any
other matter that may properly come before a meeting of stockholders. If no such
appointment shall be made, or if any of the judges so appointed shall fail to
attend or refuse or be unable to serve, then such appointment may be made by the
presiding officer at the meeting.
2
<PAGE> 3
ARTICLE 2. ACTION OF STOCKHOLDERS WITHOUT A MEETING
Section 2.1 Any action which might have been taken under these Bylaws
by vote of the stockholders at a meeting thereof may be taken without a meeting,
without prior notice and without a vote, if a consent in writing setting forth
the action so taken shall be signed by the holders of outstanding shares of
stock of the Corporation having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted, provided that prompt
notice shall be given to those stockholders who have not so consented if less
than unanimous written consent is obtained.
ARTICLE 3. BOARD OF DIRECTORS
Section 3.1 Number The number of directors which shall constitute the
whole Board of Directors shall be fixed from time to time by resolution of the
Board of Directors or stockholders (any such resolution of either the Board of
Directors or stockholders being subject to any later resolution of either of
them). The first Board of Directors and subsequent Boards of Directors shall
consist of six directors until changed as herein provided.
Section 3.2 Election of Term of Office Directors shall be elected at
the annual meeting of the stockholders, except as provided in Section 3.3 or
Section 3.7. Each director (whether elected at any annual meeting or to fill a
vacancy or otherwise) shall continue in office until his or her successor shall
have been elected and qualified or until his or her earlier death, resignation
or removal in the manner hereinafter provided.
Section 3.3 Nominations of Directors Nominations for the election of
directors may be made by the Board or a committee appointed by the Board, or by
any stockholder entitled to vote generally in the election of directors who
complies with the procedures set forth in this Section 3.3. All nominations by
the stockholders shall be made pursuant to timely notice in proper written form
to the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered to or mailed and received at the principal executive offices of the
Corporation not less than thirty days nor more than sixty days prior to the
meeting; provided, however, that in the event that less than forty days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. To be in proper written form, such stockholder's notice shall set forth in
writing, (i) as to each person whom the stockholder proposes to nominate for
election or reelection as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended, including, without
limitation, such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected, and (ii) as to the
stockholder giving notice (x) the name and address, as they appear on the
Corporation's books, of such stockholder and (y) the class and number of shares
of the Corporation which are beneficially owned by such stockholder. At the
request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation the information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. In the event that a stockholder
seeks to nominate one or more directors, the Secretary shall appoint two
inspectors, who shall not be affiliated with the Corporation, to determine
whether the stockholder has complied with this Section 3.3. If the inspectors
shall determine that a stockholder has not complied with this Section 3.3, the
inspectors shall direct the chairman of the meeting to declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the Bylaws of the Corporation, and the chairman shall so declare to the meeting
and the defective nomination will be disregarded.
Section 3.4 Vacancies and Additional Directorships If any vacancy shall
occur among the directors by reason of death, resignation or removal or as the
result of an increase in the number of directorships, a majority of the
directors then in office or a sole remaining director, though less than a
quorum, may fill any such vacancy.
3
<PAGE> 4
Section 3.5 Meetings A meeting of the board of Directors shall be held
for organization, for the election of officers and for the transaction of such
other business as may properly come before the meeting, within thirty days after
each annual election of directors.
The Board of Directors by resolution may provide for the holding of
regular meetings and may fix the times and places at which such meetings shall
be held. Notice of regular meetings shall not be required to be given, provided
that whenever the time or place of regular meetings shall be fixed or changed,
notice of such action shall be mailed promptly to each director who shall not
have been present at the meeting at which such action was taken, addressed to
him or her at his or her residence or usual place of business.
Special meetings of the Board of Directors may be called by or at the
direction of the Chairman of the Board, the President, any Vice President or any
two directors, except that when the Board of Directors consists of one director,
then the one director may call a special meeting. Except as otherwise required
by law, notice of each special meeting shall be mailed to each director,
addressed to him or her at his or her residence or usual place of business, at
least five days before the day on which the meeting is to be held, or shall be
sent to him or her at such place by telegram, radio or cable, or telephoned or
delivered to him or her personally, not later than two days before the day on
which the meeting is to be held. Such notice shall state the time and place of
such meeting but need not state the purpose thereof, unless otherwise required
by law, the Certificate of Incorporation of the Corporation or these Bylaws.
Notice of any meeting need not be given to any director who shall
attend such meeting in person or who shall waive notice thereof, before or after
such meeting, in a signed writing.
Section 3.6 Quorum and Manner of Action At each meeting of the Board of
Directors, the presence of a majority of the total number of members of the
Board of Directors, as constituted from time to time, shall be necessary and
sufficient to constitute a quorum for the transaction of business. Except as
otherwise provided by law, the Certificate of Incorporation of the Corporation
or these Bylaws, a vote of the majority of the directors present at any meeting
at which a quorum is present shall be the act of the Board.
Section 3.7 Resignation of Directors Any director may resign at any
time by giving written notice of such resignation to the Board of Directors, the
Chairman of the Board, the President, any Vice President or the Secretary.
Unless otherwise specified in such notice, such resignation shall take effect
upon receipt thereof by the Board of Directors or any such officer and the
acceptance of such resignation shall not be necessary to make it effective.
Section 3.8 Removal of Directors At any special meeting of the
stockholders duly called as provided in these Bylaws, any director or directors
may be removed from office, either with or without cause, as provided by law. At
such meeting, a successor or successors may be elected by a plurality of the
votes cast, or if any such vacancy is not so filled, it may be filled by the
directors as provided in Section 3.4.
Section 3.9 Compensation of Directors Directors shall receive such
reasonable compensation for their services as such, whether in the form of
salary or a fixed fee for attendance at meetings, with expenses, if any, as the
Board of Directors may from time to time determine. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
ARTICLE 4. ACTION OF THE BOARD WITHOUT A MEETING
Section 4.1 Any action which might have been taken under these Bylaws
by vote of the directors at any meeting of the Board of Directors or any
committee thereof may be taken without a meeting if all the members of the Board
of Directors or such committee, as the case may be, consent thereto in writing
and the writing or writings are filed with the minutes of the Board of Directors
or such committee.
4
<PAGE> 5
ARTICLE 5. COMMITTEES OF THE BOARD
Section 5.1 Designation, Power, Alternate Members and Terms of Office
The Board of Directors may, by resolution passed by a majority of the whole
Board of Directors, designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. Any such committee, to the
extent provided in such resolution and permitted by law, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business affairs of the Corporation and may authorize the seal
of the Corporation or a facsimile thereof to be affixed to or reproduced on all
such papers as said committee shall designate. The Board of Directors may
designate one or more directors as alternate members of any committee who, in
the order specified by the Board of Directors, may replace any absent or
disqualified member at any meeting of the committee. If at a meeting of any
committee one or more of the members thereof should be absent or disqualified,
and if either the Board of Directors has not so designated any alternate member
or members or the number of absent or disqualified members exceeds the number of
alternate members who are present at such meeting, then the member or members of
such committees (including alternates) present at any meeting and not
disqualified from voting, whether or not he or she or they constitute a quorum,
may unanimously appoint another director to act at the meeting in the place of
any such absent or disqualified member. The term of office of the members of
each committee shall be as fixed from time to time by the Board of Directors,
subject to these Bylaws; provided, however, that any committee member who ceases
to be a member of the Board of Directors shall ipso facto cease to be a
committee member. Each committee shall appoint a secretary, who may be the
Secretary of the Corporation or an Assistant Secretary thereof.
Section 5.2 Meetings, Notices and Records Each committee may provide
for the holding of regular meetings, with or without notice, and may fix the
times and places at which such meetings shall be held. Special meetings of each
committee may be called by or at the direction of any one of its members. Except
as otherwise provided by law, notice of each special meeting of a committee
shall be mailed to each member of such committee, addressed to him or her at his
or her residence or usual place of business, at least five days before the day
on which the meeting is to be held, or shall be sent to him or her at such place
by telegram, radio or cable, or telephoned or delivered to him or her
personally, no later than two days before the day on which the meeting is to be
held. Such notice shall state the time and place of such meeting, but need not
state the purpose thereof, unless otherwise required by law, the Certificate of
Incorporation of the Corporation or these Bylaws.
Notice of any meeting of a committee need not be given to any member
thereof who shall attend such meeting in person or who shall waive notice
thereof, before or after such meeting, in a signed writing. Each committee shall
keep a record of its proceedings.
Section 5.3 Quorum and Manner of Acting At each meeting of any
committee the presence of a majority of its members then in office shall be
necessary and sufficient to constitute a quorum for the transaction of business,
except that when a committee consists of one member, then the one member shall
constitute a quorum. In the absence of a quorum, a majority of the members
present at the time and place of any meeting may adjourn the meeting from time
to time until a quorum shall be present and the meeting may be held as adjourned
without further notice or waiver. The act of a majority of the members present
at any meeting at which a quorum is present shall be the act of such committee.
Subject to the foregoing and other provisions of these Bylaws and except as
otherwise determined by the Board of Directors, each committee may make rules
for the conduct of its business.
Section 5.4 Resignations Any member of a committee may resign at any
time by giving written notice of such resignation to the Board of Directors, the
Chairman of the Board, the President, any Vice President or the Secretary.
Unless otherwise specified in such notice, such resignation shall take effect
upon receipt thereof by the Board of Directors or any such officer, and the
acceptance of such resignation shall not be necessary to make it effective.
Section 5.5 Removal Any member of any committee may be removed with or
without cause at any time by the Board of Directors.
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Section 5.6 Vacancies If any vacancy shall occur in any committee by
reason of death, resignation, disqualification, removal or otherwise, the
remaining member or members of such committee, so long as a quorum is present,
may continue to act until such vacancy is filled by the Board of Directors.
Section 5.7 Compensation Committee members shall receive such
reasonable compensation for their services as such, whether in the form of
salary or a fixed fee for attendance at meetings, with expenses, if any, as the
Board of Directors may from time to time determine. Nothing herein contained
shall be construed to preclude any committee member from serving the Corporation
in any other capacity and receiving compensation therefor.
ARTICLE 6. OFFICERS
Section 6.1 Officers The officers of the Corporation shall be a
Chairman of the Board, a President and Chief Executive Officer, a Secretary, a
Treasurer, and, if elected by the Board of Directors, one or more Vice
Presidents, and such other officers as may be appointed in accordance with the
provisions of Section 6.3.
Section 6.2 Election, Term of Office and Qualifications Each officer
(except such officers as may be appointed in accordance with the provisions of
Section 6.3) shall be elected by the Board of Directors. Unless otherwise
provided in the resolution of election, each officer (whether elected at the
first meeting of the Board of Directors, after the annual meeting of
stockholders or to fill a vacancy or otherwise) shall hold his or her office
until the first meeting of the Board of Directors after their next annual
meeting of stockholders and until his or her successor shall have been elected,
or until his or her death, or until he or she shall have resigned in the manner
provided in Section 6.4, or shall have been removed in the manner provided in
Section 6.5.
Section 6.3 Subordinate Officers and Agents The Board of Directors from
time to time may appoint other officers or agents (including one or more
Assistant Secretaries and one or more Assistant Treasurers), to hold office for
such period, have such authority and perform such duties as are provided in
these Bylaws or as may be provided in the resolution appointing them. The Board
of Directors may delegate to any officer or agent the power to appoint any such
subordinate officers or agents and to prescribe their respective terms of
office, authorities and duties.
Section 6.4 Resignations Any officer may resign at any time by giving
written notice of such resignation to the Board of Directors, the Chairman of
the Board, the President, the Vice President or the Secretary. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or any such officer, and the
acceptance of such resignation shall not be necessary to make it effective.
Section 6.5 Removal Any officer specifically designated in Section 6.1
may be removed with or without cause at any meeting of the Board of Directors by
affirmative vote of a majority of the directors then in office. Any officer or
agent appointed in accordance with the provisions of Section 6.3 may be removed
with or without cause at any meeting of the Board of Directors by affirmative
vote of a majority of the directors present at such meeting or any time by any
superior officer or agent by the Board of Directors.
Section 6.6 Vacancies A vacancy in any office by reason of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed by these Bylaws for
regular election or appointments to such office.
Section 6.7 The Chairman of the Board The Chairman of the Board shall
be elected by the Board of Directors. He or she shall preside at all meetings of
the Board of Directors and at all meetings of stockholders and shall see that
all orders and resolutions of the Board of Directors are carried into effect.
Subject to the direction of the Board of Directors, he or she shall have general
charge of the business affairs and property of the Corporation and general
supervision over its officers and agents. He or she may sign, with any other
officer thereunto duly
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authorized, certificates representing stock of the corporation, the issuance of
which shall have been duly authorized (the signature to which may be a facsimile
signature), and may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts, agreements or other instruments duly authorized by
the Board of Directors, except in cases where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent. From time to time he or she shall report to the Board of Directors all
matters within his or her knowledge which the interests of the Corporation may
require to be brought to their attention. He or she shall have such other powers
and perform such other duties as may from time to time be prescribed by the
Board of Directors or these Bylaws.
Section 6.8 The President If there is no Chairman of the Board, or in
the absence of the Chairman of the Board, the President shall be the Chief
Executive Officer of the Corporation. The President shall, subject to the
authority of the Chairman of the Board, if there is one, have all of the powers
and duties granted to and imposed upon the Chairman of the Board. The President
is charged with the day-to-day supervision of the business affairs and property
of the Corporation.
Section 6.9 The Vice President At the request of the President, or, in
his or her absence or disability, the Vice President designated by the Board of
Directors, shall perform all the duties of the President and, when so acting,
shall have all the powers of and be subject to all restrictions upon the
President. Any Vice President may also sign, with any other officer thereunto
duly authorized (the signature to which may be a facsimile signature), and
execute in the name of the Corporation deeds, mortgages, bonds, contracts,
agreements or other instruments duly authorized by the Board of Directors,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or agent. Each Vice
President shall have such other powers and perform such other duties as may from
time to time be prescribed by the Board of Directors, the Chairman of the Board,
the President or these Bylaws.
Section 6.10 Secretary The Secretary shall
(a) record all the proceedings of the meetings of the
stockholders, the Board of Directors, and any committees in a book or books to
be kept for that purpose;
(b) cause all notices to be duly given in accordance with
the provisions of these Bylaws and as required by law;
(c) whenever any committee shall be appointed in pursuance
of a resolution of the board of Directors, furnish the chairman of such
committee with a copy of such resolution;
(d) be custodian of the records and of the seal of the
corporation, and cause such seal to be affixed to or a facsimile to be
reproduced on all certificates representing stock of the Corporation prior to
the issuance thereof and to all instruments, the execution of which on behalf of
the Corporation and under its seal shall have been duly authorized;
(e) see that the lists, books, reports, statements,
certificates and other documents and records required by law are properly kept
and filed;
(f) have charge of the stock and transfer books of the
Corporation, and exhibit such stock books at all reasonable times to such
persons as are entitled by law to have access thereto;
(g) sign (unless the Treasurer or an Assistant Secretary
or an Assistant Treasurer shall sign) certificates representing stock of the
Corporation, the issuance of which shall have been duly authorized (the
signature to which may be a facsimile signature); and
(h) in general, perform all duties incident to the office
of Secretary and have such other powers, and perform such other duties, as may
from time to time be prescribed by the Board of Directors, the President or
these Bylaws.
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Section 6.11 Assistant Secretaries At the request of the Secretary or
in his or her absence or disability, the Assistant Secretary designated by him
or her (or in the absence of such designation, the Assistant Secretary
designated by the Board of Directors, the Chairman of the Board or the
President) shall perform all the duties of the Secretary, and, when so acting,
shall have all the powers of and be subject to all restrictions upon the
Secretary. Each Assistant Secretary shall have such other powers, and perform
such other duties, as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board, the President, the Secretary or these
Bylaws.
Section 6.12 Treasurer The Treasurer shall
(a) have charge of and supervision over and be responsible
for the funds, securities, receipts and disbursements of the Corporation;
(b) cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the Corporation in
such banks or trust companies, or with such bankers or other depositories, as
shall be selected in accordance with Section 8.3 or to be otherwise dealt with
in such manner as the Board of Directors may direct;
(c) cause the funds of the Corporation to be disbursed by
checks or drafts upon the authorized depositories of the Corporation, and cause
to be taken and preserved proper vouchers for all moneys disbursed;
(d) render to the Board of Directors or the President,
whenever requested, a statement of the financial condition of the corporation
and of all of his or her transactions as Treasurer;
(e) cause to be kept at the Corporation's principal
office, correct books of account of all its business and transactions and such
duplicate books of account as he or she shall determine and upon application,
cause such books or duplicates thereof to be exhibited to any director;
(f) be empowered, from time to time, to require from the
officers or agents of the Corporation reports or statements giving such
information as he or she may desire with respect to any and all financial
transactions of the Corporation;
(g) sign (unless the Secretary or Assistant Secretary or
an Assistant Treasurer shall sign) certificates representing stock of the
corporation, the issuance of which shall have been duly authorized (the
signature to which may be a facsimile signature); and
(h) in general, perform all duties incident to the office
of the Treasurer and have such other powers and perform such other duties as may
from time to time be prescribed by the Board of Directors, the Chairman of the
Board, the President or these Bylaws.
Section 6.13 Assistant Treasurer At the request of the Treasurer or in
his or her absence or disability, the Assistant Treasurer designated by him (or
in the absence of such designation, the Assistant Treasurer designated by the
Board of Directors, the Chairman of the Board or the President) shall perform
all the duties of the Treasurer, and, when so acting, shall have all the powers
of and be subject to all restrictions upon the Treasurer. Each Assistant
Treasurer shall have such other powers and perform such other duties as may from
time to time be prescribed by the Board of Directors, the Chairman of the Board,
the President, the Treasurer or these Bylaws.
Section 6.14 Salaries The salaries of the officers of the Corporation
shall be fixed from time to time by the Board of Directors, except that the
Board of Directors may delegate to any person the power to fix the salaries or
other compensation of any officers or agents appointed in accordance with the
provisions of Section 6.3. No officer shall be prevented from receiving such
salary by reason of the fact that he or she is also a director of the
Corporation.
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ARTICLE 7. INDEMNIFICATION
Section 7.1 Indemnification The Corporation shall indemnify and advance
expenses to, in the manner and to the full extent permitted by law, any person
(or the estate of any person) who was or is a party to, or is threatened to be
made a party to, any threatened, pending or completed action, suit or
proceedings, whether or not by or in the right of the Corporation, and whether
civil, criminal, administrative, investigative, or otherwise, by reason of the
fact that such person is or was a director, officer, employee, fiduciary or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, trustee, fiduciary, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. The
indemnification and advancement of expenses provided for herein shall be
construed as a general authorization of advancement of expenses and such
indemnification will not create an obligation to repay unless a specific
determination is made that the person is not entitled to be indemnified as
authorized by law. The Corporation may, to the full extent permitted by law,
purchase and maintain insurance on behalf of any such person against any
liability which may be asserted against him or her. The indemnification and
advancement of expenses provided herein shall not be deemed to limit the right
of the Corporation to indemnify any other person for any such expenses to the
full extent permitted by law, nor shall it be deemed exclusive of any other
rights to which any person seeking indemnification from the Corporation may be
entitled under any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
ARTICLE 8. EXECUTION OF INSTRUMENTS AND DEPOSIT OF CORPORATE FUNDS
Section 8.1 Execution of Instruments Generally The Chairman of the
Board, the President, any Vice President, the Secretary or the Treasurer,
subject to the approval of the Board of Directors, may enter into any contract
or execute and deliver any instrument in the name and on behalf of the
Corporation. The Board of Directors may authorize any officer or officers, or
agent or agents, to enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation, and such authorization
may be general or confined to specific instances.
Section 8.2 Borrowing No loans or advances shall be obtained or
contracted for, by or on behalf of the Corporation, and no negotiable paper
shall be issued in its name, unless and except as authorized by the Board of
Directors. Such authorization may be general or confined to specific instances.
Any officer or agent of the Corporation thereunto so authorized may obtain loans
and advances for the Corporation, and for such loans and advances may make,
execute and deliver promissory notes, bonds, or other evidences of indebtedness
of the Corporation. Any officer or agent of the Corporation so authorized may
pledge, hypothecate or transfer as security for the payment of any and all
loans, advances, indebtedness and liabilities of the Corporation, any and all
stocks, bonds, other securities and other personal property at any time held by
the Corporation, and to that end may endorse, assign and deliver the same and do
every act and thing necessary or proper in connection therewith.
Section 8.3 Deposits All funds of the Corporation not otherwise
employed shall be deposited from time to time to its credit in such banks or
trust companies or with such bankers or other depositories as the Board of
Directors may select, or as may be selected by any officer or officers or agent
or agents authorized so to do by the Board of Directors. Endorsements for
deposit to the credit of the Corporation in any of its duly authorized
depositories shall be made in such manner as the Board of Directors from time to
time may determine.
Section 8.4 Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, and all notes or other evidences of indebtedness issued in
the name of the Corporation, shall be signed by such officer or officers or
agent or agents of the Corporation, and in such manner, as from time to time
shall be determined by the Board of Directors.
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Section 8.5 Proxies Proxies to vote with respect to shares of stock of
other corporations owned by or standing in the name of the Corporation may be
executed and delivered from time to time on behalf of the Corporation by the
Chairman of the Board, the President or any Vice President or by any other
person or persons thereunto authorized by the Board of Directors.
ARTICLE 9. RECORD DATES
Section 9.1 Record Dates In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. Only those
stockholders of record on the date so fixed shall be entitled to any of the
foregoing rights, notwithstanding the transfer of any such stock on the books of
the Corporation after any such record date fixed by the Board of Directors.
ARTICLE 10. STOCK
Section 10.1 Form and Execution of Certificates The certificates of
shares of stock of the Corporation shall be in such form as shall be approved by
the Board of Directors. The certificates shall be signed by the Chairman of the
Board, the President or a Vice President and the Treasurer, the Secretary, and
Assistant Treasurer or an Assistant Secretary, except that where any such
certificates shall be countersigned by a transfer agent and by a registrar, the
signatures of any of the officers above specified, and the seal of the
Corporation upon such certificates, may be facsimiles, engraved or printed. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of its issue.
ARTICLE 11. CORPORATE SEAL
Section 11.1 Corporate Seal The corporate seal shall be circular in
form and shall bear the name of the Corporation and words and figures denoting
its organization under the laws of the State of Nevada and the year thereof and
otherwise shall be in such form as shall be approved from time to time by the
Board of Directors.
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ARTICLE 12. FISCAL YEAR
Section 12.1 Fiscal Year. The Fiscal Year of the Corporation shall
begin on the Monday next following the Sunday nearest December 31 of each
calendar year or such other day as the Board of Directors may determine by
resolution.
ARTICLE 13. AMENDMENTS
Section 13.1 Amendments. All Bylaws of the Corporation may be amended
or repealed, and new Bylaws may be made, by a majority of the votes cast at any
Board of Directors meeting or by a majority of the votes cast at any annual or
special stockholders meeting by holders of outstanding shares of stock of the
Corporation entitled to vote.
ADOPTED as of the 28th day of June 1994.
/s/ DENNIS C. ZENSEN
-----------------------------
Dennis C. Zensen, President
/s/ FRED Y. BENNITT
-----------------------------
Fred Y. Bennitt, Secretary
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EXHIBIT 10.12
SYLVAN INC.
1990 STOCK OPTION PLAN
AMENDED AND RESTATED FEBRUARY 10,1999
AMENDED APRIL 29, 1999
SECTION 1. Establishment. There is hereby established the Sylvan Inc. 1990 Stock
Option Plan, pursuant to which employees and any other persons who perform
substantial services for or on behalf of Sylvan Inc. (the "Company"), its
subsidiaries and certain other entities may be granted options to purchase
shares of common stock of the Company, par value $.001 per share, and thereby
share in the future growth of the business. The subsidiaries of the Company
included in this Plan (the Subsidiaries) shall be any subsidiary of the Company
as defined in Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code").
SECTION 2. Status of Options. The options that may be granted pursuant to this
Plan will constitute either incentive stock options within the meaning of
Section 422 of the Code, or options that are not incentive stock options.
Incentive Stock Options and Nonincentive Stock Options shall be collectively
referred to herein as "options."
SECTION 3. Eligibility. All employees of the Company or the Subsidiaries who are
employed at the time of the adoption of this Plan or thereafter, and any other
persons who perform substantial services for or on behalf of the Company,
affiliates or any entity in which the Company has an interest (collectively, the
Grantees) shall be eligible to be granted Nonincentive Stock Options to purchase
shares of common stock under this Plan. All employees of the Company or the
Subsidiaries who are employed at the time of adoption of this Plan or thereafter
shall be eligible to be granted Incentive stock options under this Plan.
Notwithstanding the foregoing, any director who is not an employee of the
Company or a Subsidiary of the Company shall be ineligible to receive options
under this Plan.
SECTION 4. Number of Shares Covered by Options; No Preemptive Rights. The total
number of shares of common stock which may be issued and sold pursuant to
options granted under this Plan shall be 1,700,000 (or the number and kind of
shares of stock or other securities which, in accordance with Section 9 of this
Plan, shall be substituted for such shares of common stock or to which said
shares shall be adjusted. Hereinafter, all references to shares of common stock
are deemed to be references to said substituted shares or shares so adjusted.)
The maximum aggregate number of shares of common stock that shall be available
for the grant of stock options to any one individual under the Plan during any
calendar year shall be limited to 50,000 shares. The limitation in the preceding
sentence shall be interpreted and applied in a manner consistent with Section
162(m) of the Code. If any outstanding option granted under this Plan expires or
is terminated, for any reason, the shares of common stock subject to the
unexercised portion of the option will again be available for options issued
under this Plan.
SECTION 5. Administration.
(a) This Plan shall be administered by the committee (the "Committee")
referred to in paragraph (b) of this Section 5. Subject to the
express provisions of this Plan, the Committee shall have complete
authority, in its discretion, to interpret this Plan; to prescribe,
amend and rescind rules and regulations relating to it; to determine
the terms and provisions of the respective option agreements (which
need not be identical); to determine the Grantees to whom, and the
times and prices at which, options shall be
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granted; to determine the option periods, the number of shares of
common stock to be subject to each option and whether each option
shall be an Incentive Stock Option or a Nonincentive Stock Option;
and to make all other determinations necessary or advisable for the
administration of the Plan. Each option shall be clearly identified
at the time of grant as to its status. In making such determinations,
the Committee may take into account the nature of the services
rendered by the respective Grantees, their present and potential
contributions to the success of the Company and such other factors as
the Committee, in its discretion, shall deem relevant. Nothing
contained in this Plan shall be deemed to give any Grantee the right
to be granted an option to purchase shares of common stock except to
the extent and upon such terms and conditions as may be determined by
the Committee. The Committee's determination on all of the matters
referred to in this Section 5 shall be conclusive.
(b) The Committee shall consist of not less than two members of the Board
who (1) are nonemployee directors and otherwise meet the
"disinterested administration" rules of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, and (2) are "outside
directors" under Section 162(m)(4)(c) of the Code, or any successor
provision. The Committee shall be appointed by the Board, which may
at any time, and from time to time, remove any member of the
Committee, with or without cause, appoint additional members to the
Committee and fill vacancies, however caused, in the Committee. A
majority of the members of the Committee shall constitute a quorum
and all determinations of the Committee shall be made by a majority
of such quorum. Any decision or determination of the Committee
reduced to writing and signed by all of the members of the Committee
shall be fully as effective as if it had been made at a meeting duly
called and held.
(c) The Committee may at its election provide in any option agreement
covering the grant of options under this Plan that, upon the exercise
of such options, the Company will loan to the holder thereof such
amount as shall equal the purchase price of the shares of common
stock issuable upon such exercise. Such loan shall be on terms and
conditions deemed appropriate by the Committee, except that any loan
made with respect to an Incentive Stock Option shall bear interest at
a rate such that no portion of the principal amount of the loan shall
be treated as unstated or imputed interest or result in original
issue discount under Treasury Regulationss.1.421-7(e) and Sections
483 or 1272-1275 of the Code, or under corresponding provisions of
any future Internal Revenue laws or regulations.
(d) Notwithstanding any provisions hereof to the contrary, the Committee
shall have sole and exclusive authority with respect to the grant of
options to employee directors.
(e) The Committee may at its election provide in any option agreement
covering the grant of options under this Plan that, upon the exercise
of such options, the person exercising such options may require the
Company to withhold from the number of shares or other securities to
which such person would otherwise be entitled upon exercise of such
options a number of shares or other securities with an aggregate fair
market value (as determined in accordance with Section 6(h) below)
equal to the amount of any withholding taxes payable as a result of
such exercise.
(f) The Committee may at its election provide in any option agreement
covering the grant of options under this Plan that upon a "Change of
Control" of the Company, as defined below, all of the options covered
thereby shall become immediately exercisable.
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For purposes of this Section 5(f), the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is used in Sections
13(d) and 14(d) of the 1934 Act.
(2) "Beneficial Ownership" shall be determined as provided in Rule
13d-3 under the 1934 Act as in effect on the effective date of
the Plan.
(3) "Voting Shares" shall mean all securities of a company entitling
the holders thereof to vote in an annual election of directors
(without consideration of the rights of any class of stock other
than the common stock to elect directors by a separate class
vote); and a specified percentage of "Voting Power" of a company
shall mean such number of the Voting Shares as shall enable the
holders thereof to cast such percentage of all the votes which
could be cast in an annual election of directors (without
consideration of the rights of any class of stock other than the
common stock to elect directors by a separate class vote).
(4) "Tender Offer" shall mean a tender offer or exchange offer to
acquire securities of the Company (other than such an offer made
by the Company or any Subsidiary), whether or not such offer is
approved or opposed by the Board.
(5) "Change of Control" shall mean the date upon which any of the
following events occurs:
(i) The Company acquires actual knowledge that any Person other
than the Company, a Subsidiary or any employee benefit
plan(s) sponsored by the Company has acquired the
Beneficial Ownership, directly or indirectly, of securities
of the Company entitling such Person to 25% or more of the
Voting Power of the Company;
(ii) A Tender Offer is made to acquire securities of the Company
entitling the holders thereof to 25% or more of the Voting
Power of the Company;
(iii) A solicitation subject to Rule 14a-11 under the 1934 Act
(or any successor rule) relating to the election or removal
of 50% or more of the members of any class of the Board
shall be made by any person other than the Company; or
(iv) The shareholders of the Company shall approve a merger,
consolidation, share exchange, division or sale or other
disposition of assets of the Company as a result of which
the shareholders of the Company immediately prior to such
transaction shall not hold, directly or indirectly,
immediately following such transaction a majority of the
Voting Power of (a) in the case of a merger or
consolidation, the surviving or resulting corporation, (b)
in the case of a share exchange, the acquiring corporation
or (c) in the case of a division or a sale or other
disposition of assets, each surviving, resulting or
acquiring corporation which, immediately following the
transaction, holds more than 10% of the consolidated assets
of the Company immediately prior to the transaction;
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provided, however, that (i) if securities beneficially
owned by a Grantee are included in determining the
Beneficial Ownership of a Person referred to in paragraph
5(f)(5)(i), (ii) a Grantee is required to be named pursuant
to Item 2 of the Schedule 14D-1 (or any similar successor
filing requirement) required to be filed by the bidder
making a Tender Offer referred to in paragraph 5(f)(5)(ii),
or (iii) if a Grantee is a "participant" as defined in
14a-11 under the 1934 Act (or any successor rule) in a
solicitation (other than a solicitation by the Company)
referred to in paragraph 5(f)(5)(iii), then no Change of
Control with respect to such Grantee shall be deemed to
have occurred by reason of such event.
SECTION 6. Terms of Incentive Stock Options. Each Incentive Stock Option granted
under this Plan shall be evidenced by an Incentive Stock Option agreement which
shall be executed by the Company and by the person to whom such Incentive Stock
Option is granted, and shall be subject to the following terms and conditions:
(a) The price at which shares of common stock covered by each Incentive
Stock Option may be purchased pursuant thereto shall be determined
in each case on the date of grant by the Committee, but shall be an
amount not less than one hundred percent (100%) of the fair market
value of such shares on the date of grant, except as provided in
Section 6(e).
(b) The option price of the shares to be purchased pursuant to each
Incentive Stock Option shall be paid in full in cash, or by delivery
(i.e., surrender) of shares of common stock of the Company then
owned by the Grantee, at the time of the exercise of the Incentive
Stock Option. Shares of common stock so delivered will be valued on
the day of delivery for the purpose of determining the extent to
which the option price has been paid thereby, in the same manner as
provided for the purchase price of Incentive Stock Options as set
forth in paragraph (h) of this Section 6.
(c) Each Incentive Stock Option agreement shall provide that such
Incentive Stock Option may be exercised by the Grantee, in such
parts and at such times as may be specified in such Agreement,
within a period specified in the Incentive Stock Option agreement
which does not exceed ten years after the date on which the
Incentive Stock Option is granted or such shorter period specified
in Section 6(e) (hereinafter called the "Incentive Stock Option
Period"); and, in any event, only during the continuance of the
employee's employment by the Company or the Subsidiaries during the
period of three months (or twelve months if the employee is disabled
within the meaning of Section 422(c)(6) of the Code or any successor
provision) after the termination of such employment to the extent
that the right to exercise such Incentive Stock Option had accrued
at the date of such termination; provided, however, that if
Incentive Stock Options as to 100 or more shares are held by a
Grantee, then such Incentive Stock Options may not be exercised for
less than 100 shares at any one time, and if Incentive Stock Options
for less than 100 shares are held by a Grantee, then Incentive Stock
Options for all such shares must be exercised at one time; and
provided, further, that, if the Grantee, while still employed by the
Company or the Subsidiaries, shall die within the Incentive Stock
Option Period, the Incentive Stock Option may be exercised, to the
extent specified in the Incentive Stock Option Agreement, and as
herein provided, but only prior to the first to occur of: (1) the
expiration of the period of one year after the date of the Grantee's
death, or (2) the expiration of the Incentive Stock Option Period,
by the person or persons entitled to do so under the Grantee's will,
or, if the Grantee shall fail to make testamentary disposition of
said Incentive Stock Option, or shall die intestate, by the
Grantee's legal representative or representatives.
4
<PAGE> 5
(d) Each Incentive Stock Option granted under this Plan shall by its
terms be nontransferable by the Grantee except by will or by the
laws of descent and distribution, and each Incentive Stock Option
shall by its terms be exercisable during the Grantee's lifetime only
by him.
(e) Notwithstanding the foregoing, if an Incentive Stock Option is
granted to a person at any time when such person owns, within the
meaning of Section 424(d) of the Code, more than 10% of the total
combined voting power of all classes of stock of the employer
corporation (or a parent or subsidiary of such corporation within
the meaning of Section 424 of the Code), the price at which each
share of common stock covered by such Incentive Stock Option may be
purchased pursuant to such Incentive Stock Option shall not be less
than 110% of the fair market value (determined as in paragraph (h)
of this Section) of the shares of common stock at the time the
Incentive Stock Option is granted, and such Incentive Stock Option
Period during which such Incentive Stock Option must be exercised
may not exceed five years after the date on which such Incentive
Stock Option is granted.
(f) The Incentive Stock Option agreement entered into pursuant hereto
may contain such other terms, provisions and conditions not
inconsistent herewith as shall be determined by the Committee,
including, without limitation, provisions (1) requiring the giving
of satisfactory assurances by the Grantee that the shares are
purchased for investment and not with a view to resale in connection
with a distribution of such shares, and will not be transferred in
violation of applicable securities laws, (2) restricting the
transferability of such shares during a specified period, and (3)
requiring the resale of such shares to the Company at the Option
price if the employment of the employee terminates prior to a
specified time. In addition, the Committee, in its discretion, may
afford to holders of Incentive Stock Options granted under this Plan
the right to require the Company to cause to be registered under the
Securities Act of 1933, as amended, for public sale by the holders
thereof, shares of common stock subject to such Incentive Stock
Options upon such terms and subject to such conditions as the
Committee may determine to be appropriate.
(g) In the discretion of the Committee, a single option agreement may
include both Incentive Stock Options and Non-incentive Stock
Options, provided that each type of option is identified within the
option agreement, or those options may be included in separate
option agreements.
(h) For all purposes under the Plan, fair market value of the common
stock shall be the mean between the following prices, as applicable,
for the date as of which fair market value is to be determined as
quoted in The Wall Street Journal (or in such other reliable
publication as the Committee, in its discretion, may determine to
rely upon): (1) if the common stock is listed on the New York Stock
Exchange, the highest and lowest sales prices per share of the
common stock as quoted in the NYSE-Composite Transactions listing
for such date, (2) if the common stock is not listed on such
exchange, the highest and lowest sales prices per share of common
stock for such date on (or on any composite index including) the
principal United States securities exchange registered under the
1934 Act on which the common stock is listed, or (3) if the common
stock is not listed on any such exchange, the highest and lowest
sales prices per share of common stock for such date on the National
Association of Securities Dealers Automated Quotations System or any
successor system then in use
5
<PAGE> 6
("NASDAQ"). If there are no such sale price quotations for the date
as of which fair market value is to be determined but there are such
sale price quotations within a reasonable period both before and
after such date, then fair market value shall be determined by
taking a weighted average of the means between the highest and
lowest sales prices per share of common stock as so quoted on the
nearest date before and the nearest date after the date as of which
fair market value is to be determined. The average should be
weighted inversely by the respective numbers of trading days between
the selling dates and the date as of which fair market value is to
be determined. If there are no such sale price quotations on or
within a reasonable period both before and after the date as of
which fair market value is to be determined, then fair market value
of the common stock shall be the mean between the bona fide bid and
asked prices per share of common stock as so quoted for such date on
NASDAQ, or if none, the weighted average of the means between such
bona fide bid and asked prices on the nearest trading date before
and the nearest trading date after the date as of which fair market
value is to be determined, if both such dates are within a
reasonable period. The average is to be determined in the manner
described above in this Section 6(h). If the fair market value of
the common stock cannot be determined on the basis previously set
forth in this Section 6(h) on the date as of which fair market value
is to be determined, the Committee shall in good faith determine the
fair market value of the common stock on such date. Fair market
value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse.
SECTION 7. Terms of Nonincentive Stock Options. Each Nonincentive Stock Option
granted under this Plan shall be evidenced by a Nonincentive Stock Option
agreement which shall be executed by the Company and by the person to whom such
Nonincentive Stock Option is granted, and shall be subject to the following
terms and conditions:
(a) The price at which shares of common stock covered by each
Nonincentive Stock Option may be purchased pursuant thereto shall be
an amount not less than one hundred percent (100%) of the fair
market value of such shares.
(b) Each Nonincentive Stock Option agreement shall provide that such
Nonincentive Stock Option may be exercised by the Grantee, in such
parts and at such times as may be specified in such agreement,
within a period up to and including ten years after the date on
which the Nonincentive Stock Option is granted.
(c) Each Nonincentive Stock Option granted under this Plan shall by its
terms be non-transferable by the Grantee except by will or by the
laws of descent and distribution, and each Nonincentive Stock Option
shall by its terms be exercisable during the Grantee's lifetime only
by him.
(d) The Nonincentive Stock Option Agreement entered into pursuant hereto
may contain such other terms, provisions and conditions not
inconsistent herewith as shall be determined by the Committee, in
its sole discretion, including without limitation the terms,
provisions and conditions set forth in Section 6(f) with respect to
Incentive Stock Option agreements.
SECTION 8. Limit on Option Amount. Notwithstanding any provision contained
herein or in any Option agreement, the aggregate fair market value (determined
under Section 6(h) as of the time such Incentive Stock Options are granted) of
the shares of common stock with respect to which Incentive Stock Options are
first exercisable by any employee during any calendar year (under all
6
<PAGE> 7
stock option plans of the employee's employer corporation and its parent and
subsidiary corporation within the meaning of Section 424 of the Code) shall not
exceed $100,000. If the date on which one or more of such Incentive Stock
Options could first be exercised would be accelerated pursuant to any provision
of the Plan or any option agreement, and the acceleration of such exercise date
would result in a violation of the restriction set forth in the preceding
sentence, then, notwithstanding any such provision, but subject to the
provisions of the next succeeding sentence, the exercise dates of such Incentive
Stock Options shall be accelerated only to the date or dates, if any, that do
not result in a violation of such restriction and, in such event, the exercise
dates of the Incentive Stock Options with the lowest option prices shall be
accelerated to the earliest such dates. The Committee may, in its discretion,
authorize the acceleration of the exercise date of one or more Incentive Stock
Options even if such acceleration would violate the $100,000 restriction set
forth in the first sentence of this paragraph and even if such Incentive Stock
Options are thereby converted in whole or in part to Nonincentive Stock Options.
The limit in this paragraph shall not apply to options that are designated as
Nonincentive Stock Options, and, except as otherwise provided herein, there
shall be no limit on the amount of such options, which may be first exercisable
in any year.
SECTION 9. Adjustment of Number of Shares. In the event that a dividend shall be
declared upon the shares of common stock payable in shares of common stock, the
number of shares of common stock then subject to any option granted hereunder,
the number of shares reserved for issuance pursuant to this Plan but not yet
covered by an option, and the number of shares which may be awarded under the
Plan to any one individual during any calendar year shall be adjusted by adding
to each of such shares the number of shares which would be distributable thereon
if such shares had been outstanding on the date fixed for determining the
shareholders entitled to receive such stock dividend. In the event that the
outstanding shares of common stock shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation, whether through reorganization, recapitalization,
stock split-up, combination of shares, merger or consolidation, then there shall
be substituted for each share of common stock subject to any such option and for
each share of common stock reserved for issuance pursuant to the Plan but not
yet covered by an option, the number and kind of shares of stock or other
securities into which each outstanding share of common stock shall be so changed
or for which each such share shall be exchanged; provided, however, that in the
event that such change or exchange results from a merger or consolidation, and
in the judgment of the Board such substitution cannot be effected or would be
inappropriate, or if the Company shall sell all or substantially all of its
assets, the Company shall use reasonable efforts to effect some other adjustment
of each then outstanding option which the Board, in its sole discretion, shall
deem equitable. In the event that there shall be any change, other than as
specified above in this Section 9, in the number or kind of outstanding shares
of common stock or of any stock or other securities into which such shares of
common stock shall have been changed or for which they shall have been
exchanged, then, if the Board shall determine that such change equitably
requires an adjustment in the number or kind of shares theretofore reserved for
issuance pursuant to the Plan but not yet covered by an option and of the shares
then subject to an option or options, such adjustment shall be made by the Board
and shall be effective and binding for all purposes of this Plan and of each
option agreement. Notwithstanding the foregoing, if any adjustment in the number
of shares which may be issued and sold pursuant to options is required by the
Code or regulations issued pursuant thereto to be approved by the shareholders
in order to enable the Company to issue Incentive Stock Options pursuant to this
Plan, then no such adjustment shall be made without the approval of the
shareholders. In the case of any such substitution or adjustment as provided for
in this Section 9, the option price in each option agreement for each share
covered thereby prior to such substitution or adjustment will be the total
option price for all shares of stock or other securities which shall have been
substituted for each such share or to which such share
7
<PAGE> 8
shall have been adjusted pursuant to this Section 9. No adjustment or
substitution provided for in this Section 9 shall require the Company, in any
option agreement, to sell a fractional share, and the total substitution or
adjustment with respect to each option agreement shall be limited accordingly.
Notwithstanding the foregoing, in the case of Incentive Stock Options, if the
effect of the adjustments or substitution is to cause the Incentive Stock Option
to fail to continue to qualify as an Incentive Stock Option or to cause a
modification, extension or renewal of such Incentive Stock Option within the
meaning of Section 424 of the Code, the Board shall use reasonable efforts to
effect such other adjustment of each then outstanding option as the Board, in
its sole discretion, shall deem equitable.
SECTION 10. Amendments. This Plan may be terminated or amended from time to time
by vote of the Board; provided, however, that no such termination or amendment
shall materially adversely affect or impair any then outstanding option without
the consent of the Grantee thereof and no amendment which shall (a) change the
total number of shares which may be issued and sold pursuant to options granted
under this Plan, or (b) change the designation of employees eligible to receive
Incentive Stock Options or the class of employees or other persons eligible to
receive options, or (c) reprice previously granted options, or (d) materially
modify the Plan in other ways, shall be effective without the approval of the
shareholders. Notwithstanding the foregoing, the Plan may be amended by the
Committee to incorporate any amendments made to the Code which the Committee
deems to be necessary or desirable to (a) preserve incentive stock option status
for outstanding Incentive Stock Options and to preserve the ability to issue
Incentive Stock Options pursuant to this Plan, or (b) permit stock options under
the Plan to qualify for exemption from Section 16(b) of the 1934 Act.
SECTION 11. Effective Date and Termination. The effective date and date of
adoption of this Plan shall be February 10, 1999, the date of adoption of the
amended and restated Plan by the Board, provided that such adoption of the Plan
by the Board is approved by shareholders in compliance with Nevada law at a duly
held meeting of the shareholders held on or prior to February 10, 2000, at which
a quorum representing a majority of the outstanding voting stock of the Company
is, either in person or by proxy, present and voting. No option granted under
the Plan may be exercised until after and is contingent upon such approval.
Except to the extent necessary to govern outstanding options, this Plan shall
terminate on, and no additional options shall be granted after, ten years from
the date that the Plan is adopted, or ten years from the date the Plan is
approved by the shareholders, whichever is earlier.
8
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<NAME> SYLVAN INC.
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